Date posted: 25th Apr 2025
By Jonathan Doyle, Accounts and Business Advisory Partner
New monetary thresholds will apply to accounting periods commencing on or after 6th April 2025. The changes will primarily impact micro, small and medium sized companies and limited liability partnerships.
The new regulations will mean that more companies will be able to claim audit exemptions and prepare less descriptive financial reports. This change has been expected for some time, as Brexit has allowed the government to set their own thresholds, with the last threshold changes dating back to 2013
Why are these changes being made?
The primary reason for the new regulations is to simplify and reduce the financial reporting burden on companies, whilst also taking into account the impact of inflation since the previous thresholds were set. Micro and small companies in particular often have limited resources in terms of finance departments and so the overall easing and simplification of accounting is a welcomed change.
If you are considering outsourcing your finance department, our Managed Services team at Clive Owen LLP are industry experts and can work with your existing team, assisting them with the day-to-day or larger jobs. Contact the Managed Services team here.
What are the new thresholds?
The changes to the thresholds are monetary only, with the average number of employees criteria unchanged under this review. The table below shows the new thresholds. To satisfy the appropriate company size, a business must be within two of the three criteria.
The legislation also includes a transitional provision for the application of two consecutive year rule, which enables companies and LLPs to benefit from the uplift as soon as possible. This means that when determining company size for accounting periods beginning or after 6 April 2025, preparers can assume that the new thresholds were applicable in the previous financial year.
What impact will these changes have on businesses?
Recent government reports suggest the new regulations will allow more than 100,000 companies to take advantage of the micro entity category, with around 14,000 companies potentially benefitting from audit exemption under the new regulations. Contact our expert team here, if you think you may be affected.
Other updates
There are changes coming to Director’s Report requirements, removing some of the overlapping requirements and again making the whole process simpler. The larger scale changes to FRS 102 have also been factored into these new regulations.
If you have any questions on any of the content raised in this article, contact me or my expert team here.
