Following a period of consultation, the Government recently announced increases in the company size and audit limits. The aim of these changes is to reduce regulatory burden and the complexity within companies accounts.

What are the new limits?

	Micro		Small		Medium
	Old	New	Old	New	Old	New
Annual turnover	£632k	£1mil	£10.2mil	£15mil	£36mil	£54mil
Gross assets	£316k	£500k	£5.1mil	£7.5mil	£18mil	£27mil
Average employees	10		50		250

When do these changes take effect?

These changes are due to take effect for periods commencing on or after 1 October 2024. All year ends up to 30 September 2024 remain unaffected. It is important to check what the position of the 30 September 2024 would be under the new regime now though, as this will affect the company for their 2025 position.

To qualify for each size, a company must meet 2 out of the 2 criteria for 2 consecutive years.

When applying the new size limits, the company must reassess past periods in light of these rules. Please find a worked example below:

	30.9.25	30.9.24	30.9.23
Annual turnover	£12mil	£9mil	£11mil
Gross assets	£6mil	£6mil	£4mil
Average employees	45	54	55
Current size		Medium	Medium
New sizes	Small	Small

Under the current rules the above would be medium sized, but when we come to the first year under the new rules, it would have qualified as small if these rules had always been in place, so could be small in 2025.

Providing the entity is not in a non-small group or an ineligible sector then it can be exempt from audit in 2025 as well.

What does the future hold?

The government are consulting on further amendments to the above to further reduce the regulatory burden. This will see the medium sized employee numbers increased from 250 to 500 which will remove the requirement for a medium company to produce a strategic report.

If you’re unsure as to how these new rules will affect your regulatory requirements then please get in touch with Joanne Brown.