The government has made regulations to raise the monetary thresholds used to classify companies as large, medium, small or as a micro-entity and to remove certain reporting requirements from the Directors’ Report. The Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024 apply to financial years beginning on or after 6 April 2025.
Classification of companies
A company is classified as a micro-entity, small, medium or large by reference to its turnover, balance sheet total and number of employees. It will fall into the next category up if it crosses two of the three thresholds for that category.
The Regulations increase the monetary thresholds (but not the employee thresholds) for these classifications. Following the changes made to the Companies Act 2006 by the Regulations, the thresholds will be:
|
Entity type |
Turnover – not more than: |
Balance sheet total – not more than: |
Employees – not more than: |
|
Micro-entity |
£1 m |
£500,000 |
10 |
|
Small company |
£15 m |
£7.5 m |
50 |
|
Medium-sized company |
£54 m |
£27 m |
250 |
The Regulations also amend the thresholds which apply where the company is a parent company to assess how its group should be classified.
The size of the company in previous financial years is used when determining the classification of a company each year. The Regulations provide that, when looking at those previous financial years, for financial years beginning on or after 6 April 2025 the new thresholds should be used.
Disclosures removed from the Directors’ Report
For Directors’ Reports relating to financial years beginning on or after 6 April 2025, certain disclosures will no longer be required, including:
- important events affecting the company since the end of the financial year;
- likely future developments in the business of the company;
- branches of the company outside the UK;
- employment of disabled persons; and
- engagement with employees, suppliers, customers and others.
When the government confirmed in October 2024 that it would be making this legislation, it also announced that it will be launching a wider review of non-financial reporting in Spring 2025 (see our blog post here).
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