The UK government have recently announced significant updates to the thresholds that define micro, small, and medium-sized enterprises (SMEs). The changes come into effect for financial years beginning on or after April 6, 2025. The legislation includes a transitional provision for the retroactive application of the two-year rule. This means that it can be assumed that the new thresholds were in place during the previous year when applying the two-year rule, meaning companies can take advantage of the amended thresholds as soon as they come into effect.
This means that more companies will now fall into the smaller and micro categories, exempting them from statutory audits and benefiting from more simplified reporting, for example there may no longer be a need to produce a strategic report.
Revised Company Size Threshold Change
The new criteria for classifying companies are as follows:
| Company Size | Turnover (≤) | Balance Sheet Total* (≤) | Average Employees (≤) | |||
| New | Current | New | Current | New | Current | |
| Micro | £1 m | £ 632 k | £500 k | £ 316 k | 10 | 10 |
| Small | £15 m | £10.2 m | £7.5 m | £ 5.1 m | 50 | 50 |
| Medium | £54 m | £ 36 m | £27 m | £ 18 m | 250 | 250 |
*i.e., total assets
To qualify for a specific category, a company must meet at least two of these three criteria.
Whilst simplified reporting will be beneficial for some, each company and their stakeholders’ needs will be different. It’s important for each company to consider their own individual needs when assessing how they will be impacted by the changes.
If you’re considering how your company will be impacted by the changes, please contact a member of your current engagement team.
