The thresholds defining company sizes, unchanged since 2016, are set to be updated on 6 April 2025. Additionally, Companies House plans to implement new identity verification requirements for directors and people with significant control (PSCs) by late 2025.
Static reporting thresholds, along with a couple of years of relatively high inflation, will have drawn more companies into reporting requirements that may not be appropriate for them.
Threshold sizes
The company size thresholds are expected to increase by approximately 50%, although there will be no change for the average number of employees. The new thresholds – with current thresholds bracketed – will be:
| Micro-entity | Small company | Medium-sized company | |
| Turnover | £1 million (£632,000) | £15 million (£10.2 million) | £54 million (£36 million) |
| Balance Sheet | £500,000 (£316,000) | £7.5 million (£5.1 million) | £27 million (£18 million) |
| Average number of employees | 10 | 50 | 500 |
To qualify as a micro-entity, small or medium-sized company, a company must normally not exceed two of the three relevant criteria above.
As a result of the redefinition exercise:
- The increased thresholds will see more than 100,000 small companies reclassified as micro-entities.
- Micro-entities benefit from reduced reporting requirements, although lenders may require more detailed information in order to assess a company’s creditworthiness.
- Small companies may qualify for audit exemption; companies that were in danger of moving to a medium-sized classification might now retain this exemption.
Growing companies may find it preferable to maintain their current reporting requirements, even if increased thresholds hold out the offer of a temporary step down to a lower regime. This is to avoid disrupting their current reporting systems for a change taking place over one or two years.
Identity verification
The plan is that by autumn 2025, directors and PSCs will have to verify their identities at the point a new company is incorporated. Verification for existing companies will then take place over the following 12 months when a company’s confirmation statement is filed. This transition could be quite burdensome for many companies.
Compliance activity against those who have failed to verify their identity is expected to commence by the end of 2026.
Companies House accounts guidance can be found here.
For more information, contact us on 01142 664 432 or email info@smh.group.
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