Proposed changes to company size thresholds set to affect over 100,000 SMEs

Proposed changes to company size thresholds set to affect over 100,000 SMEs

To streamline reporting requirements for small businesses, the UK government announced plans to raise the monetary thresholds used to define company size.

Unveiled in on 18 March 2024 by Prime Minister, Rishi Sunak, the details were set out by Small Business Minister, Kevin Hollinrake, in a written statement to Parliament. The proposals aim to create a ‘smarter, simpler, and better’ non-financial reporting framework by reducing regulations for small businesses and ensuring reporting burdens are proportionate to their size.

The proposed changes set out in the statement include:

  • 113,000 small firms would be reclassified as micro-sized businesses, allowing them to submit even simpler accounts.
  • 13,000 medium-sized companies would become small businesses, exempting them from statutory audits and allowing them to use simpler accounting procedures; and
  • 5,000 large companies would become medium-sized, meaning they would no longer be required to undergo statutory audits and could file fewer complex accounts.

The proposals are in full in the table below. To be classified for these thresholds, businesses must meet two out of three of the requirements:

2 of 3 out of:MicroSmallMediumLarge
Annual turnovernmt*
nmt £10.2mnmt £15mnmt £36mnmt £54m£36m+£54m+
Balance sheet totalnmt
nmt £500knmt £5.1mnmt £7.5mnmt £18mnmt £27m£18m+£27m+
Average number of employeesnmt 10nmt 50nmt 250251+
*nmt = no more than

The government intends to introduce the necessary legislation in Summer 2024 to implement these changes. The new company size classifications are expected to be applied to financial years beginning on or after 1 October 2024.

Streamlining annual reports and audits

In addition to company size classification changes, Kevin Hollinrake has outlined further plans to simplify reporting requirements. The government intends to:

  • Eliminate unnecessary or outdated elements from the directors' report, remuneration report, and policy;
  • Make it easier for companies to submit digital annual reports; and
  • Fix problems identified in the audit regulatory framework following the UK's adoption of EU law.

Future consultations

The government also plans to open consultations on additional measures later in 2024, including:

  • Increase the employee limit used to define a medium-sized company from 250 to 500 for reporting purposes;
  • Potentially exempt medium-sized companies from producing a strategic report; and
  • Consider exempting smaller public interest entities from audit tendering and rotation requirements

About our expert

Adam Kudryl

Adam Kudryl

Chief Legal Officer & Head of Corporate
Having qualified as a solicitor in 2003, Adam has over 20 years' experience in advising businesses on their growth and exit strategies. Adam joined Harper James as a Partner in 2018 and became Head of Corporate in 2022. As of April 2024, Adam’s new role is Chief Legal Officer & Head of Corporate. In this role, he is responsible for the legal services aspects of Harper James and for defining the firm’s strategic vision and objectives to achieve our long-term goals, together with our CEO, Toby Harper, and the other senior leaders.

What next?

Please leave us your details and we’ll contact you to discuss your situation and legal requirements. There’s no charge for your initial consultation, and no-obligation to instruct us. We aim to respond to all messages received within 24 hours.

Your data will only be used by Harper James Solicitors. We will never sell your data and promise to keep it secure. You can find further information in our Privacy Policy.

Our offices

A national law firm

A national law firm

Our commercial lawyers are based in or close to major cities across the UK, providing expert legal advice to clients both locally and nationally.

We mainly work remotely, so we can work with you wherever you are. But we can arrange face-to-face meeting at our offices or a location of your choosing.

Head Office

Floor 5, Cavendish House, 39-41 Waterloo Street, Birmingham, B2 5PP
Regional Spaces

Stirling House, Cambridge Innovation Park, Denny End Road, Waterbeach, Cambridge, CB25 9QE
13th Floor, Piccadilly Plaza, Manchester, M1 4BT
10 Fitzroy Square, London, W1T 5HP
Harwell Innovation Centre, 173 Curie Avenue, Harwell, Oxfordshire, OX11 0QG
1st Floor, Dearing House, 1 Young St, Sheffield, S1 4UP
White Building Studios, 1-4 Cumberland Place, Southampton, SO15 2NP
A national law firm

To access legal support from just £145 per hour arrange your no-obligation initial consultation to discuss your business requirements.

Make an enquiry