In October 2024, Sir Kier Starmer’s Labour Government confirmed they would be taking forward the proposal by the previous Conservative Government to increase the thresholds which determine whether a company is a micro-entity, small, medium or large-sized company.
On 10 December 2024, legislation to increase the thresholds, and also those for LLPs, was laid before Parliament and applies for accounting periods commencing on or after 6 April 2025.
The current and revised thresholds, the revised levels being as originally proposed, are summarised below.
| Threshold measure | Current | Revised | Current | Revised | Current | Revised |
| Micro-entity | Micro-entity | Small-sized company | Small-sized company | Medium-sized company | Medium-sized company | |
| Turnover not exceeding | £632,000 | £1 m | £10.2 m | £15 m | £36 m | £54 m |
| Total assets (fixed plus current assets) not exceeding | £316,000 | £500,000 | £5.1 m | £7.5 m | £18 m | £27 m |
| Average number of employees not exceeding | 10 | 10 | 50 | 50 | 250 | 250 |
In order to satisfy the criteria to be a certain size, two out of three of the above thresholds must be met for two out of the last three accounting periods. However, a company will not qualify as a micro-entity, small or medium-sized company if it is ineligible or is part of an ineligible group, which includes a traded company or an insurance market activity.
When assessing the size criteria for accounting periods commencing on or after 6 April 2025, the revised thresholds are treated as always having been in place to prevent any mismatches in assessing the last three accounting periods to determine size qualification.
There are similar changes to the small and medium-sized group thresholds, which are not covered here.
As well as reflecting price changes since the last increases in 2016, these will cut complexity and reporting burdens for 133,000 companies and LLPs, as estimated by the Government.
In addition, the legislation has removed the following requirements from the Directors’ Report for large and medium-sized entities, as these are now considered to be obsolete or overlap with other requirements:
- financial instruments
- important events that have occurred since the end of the financial year;
- likely future developments;
- research and development;
- branches outside the UK;
- the employment of disabled people (this requirement is also being removed for small entities);
- engagement with employees; and
- engagement with customers and suppliers.
The changes to the Directors’ Report are also effective for accounting periods commencing on or after 6 April 2025.
