News & Events
Changes to company size and audit thresholds
30th April 2025
The long awaited changes to company size and audit thresholds has come in to effect for companies with a year end starting on or after 6 April 2025. The thresholds have not been changed since 2013 and the reasoning behind this change is to cut complexity and reduce the burden on companies within the UK. The Government estimates that 14,000 medium sized companies will now be classified as small companies. In this article, Rowleys’ Partner Matt Hutchinson explains more about the changes.
What are the new audit thresholds?
The new thresholds are as follows and a company has to exceed two out of the three thresholds in order to be classified as the size:
| Micro | Small | Medium | ||||
| Previous | New | Previous | New | Previous | New | |
| Turnover not more than: | £632k | £1m | £10.2m | £15m | £36m | £54m |
| Gross assets not more than: | £316k | £500k | £5.1m | £7.5m | £18m | £27m |
| Monthly average number of employees, not more than: | 10 | 10 | 50 | 50 | 250 | 250 |
The requirement for audit has remained on the same basis as before taking in to account the uplift in company size thresholds, with medium and large companies requiring an audit. There also remains criteria as per the Companies Act 2006 for companies that excluded from the small company regime and remain ineligible for audit exemption. These are:
- A public company.
- A company that is an authorised insurance company, a banking company, an e-money issuer, a MiFID investment firm or a UCITS management company, a company that carries on insurance market activities or is a scheme funder of a Master Trust scheme.
- A member of an ineligible group.
Two-year rule and transition
There also remains the two-year rule, where company exceeds the size thresholds for a second consecutive year in order to be classified as the specified size. This rule also applies to the year of transition to the new thresholds. A company will assume that the new thresholds were in place for the prior year too in order to confirm the company size.
What are the benefits of an audit?
Whilst the increase in the company size thresholds will remove the need for an audit to be completed, there are many other reasons and benefits to choose to have an audit of the company financial statements.
- The company may operate in a sector that requires its suppliers to have audited financial statements in order to engage with them.
- Identify weaknesses within internal controls with the company to allow for changes to be made to make the controls more robust.
- Assist with the fraud detection as part of the audit testing.
- The company may have existing or planned borrowing requirements that require an audit to be completed to meet the conditions of the agreement.
If you would like to discuss the changes to the audit threshold, please get in touch with our friendly team who will be able to support you.