It’s official – the government has confirmed that from April 2025, the monetary thresholds for small and medium businesses (and audit requirements) will be increasing.
If that sentence made you yawn, stick with me. This is actually a big deal for many businesses.
Because while it might sound like a dry bit of admin, the reality is this change could save businesses a lot of money by reducing their reporting requirements. And let’s be honest, if there’s a way to cut unnecessary costs without breaking any rules, we’re all ears, right?
Here’s everything you need to know about small company and audit thresholds.
What are the new thresholds for April 2025?
The key change here is that the financial size limits for small and medium businesses are increasing, meaning that some businesses that previously counted as medium-sized (and were required to have an audit) will now be classified as small – and can wave goodbye to that mandatory audit requirement.
Here’s what the new thresholds look like:
For a company to qualify as micro, it must meet two of the following three criteria:
- Turnover: up to £1 million (previously £632 thousand)
- Total assets: up to £500 thousand (previously £316 thousand)
- Number of employees: up to 10 (unchanged)
For a company to qualify as small, it must meet two of the following three criteria:
- Turnover: up to £15.2 million (previously £10.2 million)
- Total assets: up to £7.6 million (previously £5.1 million)
- Number of employees: up to 50 (unchanged)
For a company to qualify as medium, it must meet two of the following three criteria:
- Turnover: up to £57 million (previously £36 million)
- Total assets: up to £28.8 million (previously £18 million)
- Number of employees: up to 250 (unchanged)
These changes also apply to small and medium-sized groups, so if you’re part of a group of companies, it’s worth checking how this affects you. The revised small company and audit thresholds could mean good things!
| Want to ditch the read and discuss it instead? Get in touch with us at [email protected] and we’ll book in a free consultation to talk about your needs and if these changes impact you. |
When do the changes come into effect?
The new small company and audit thresholds take effect from the 6th April 2025, and the best part? You don’t have to wait for a whole financial year to take advantage of them.
This means businesses can apply the new thresholds straight away for their next set of accounts AND can adjust prior-year comparisons in their financial statements to align with the new rules.
So, if you were previously caught under medium-sized reporting requirements, you might be able to drop down to small company status sooner than expected.
What are the benefits of these changes?
You might be thinking, “Great, but why should I care?” Well, here’s why this matters:
1. Some businesses will no longer need an audit
If your business was just over the old thresholds, you may have been required to pay for an expensive audit every year – even if you didn’t really need one.
Now, with the higher limits, some companies will fall under the small business category and no longer be legally required to have an audit.
This means:
- Significant cost savings (audit fees aren’t cheap!)
- Less admin hassle
- More flexibility in how your accounts are prepared
Of course, some businesses choose to have an audit for credibility reasons, but if you were only doing it because the law said so, this could be a big win.
2. Potentially lower accountancy fees
Many businesses that previously needed to work with big audit firms might no longer need to – which means they can switch to more cost-effective accountants who provide a more personal and proactive service (cough like us at JVCA cough).
If you’ve been stuck paying high fees because your business was just over the old limits, now might be the time to rethink your accounting setup.
3. Impact on IR35 and off-payroll working rules
Now, this is an interesting twist.
The way IR35 (off-payroll working rules) apply depends on whether the company receiving services qualifies as small or medium.
With these new, higher small company and audit thresholds, more businesses will now qualify as small rather than medium – which could mean that some subcontractors fall outside of IR35.
That’s potentially great news for freelancers and contractors, as it could mean less admin, less tax complexity, and more control over how they get paid.
It’s definitely something worth looking into if you hire contractors or work as one.
Should you review your business structure?
If your business was previously classed as medium but now qualifies as small, it might be time to review your accounting and tax setup.
This could be the perfect opportunity to:
- Reassess your need for an audit and potentially cut out that cost
- Look for a more cost-effective accounting firm
- Review how IR35 changes could impact your business
- Ensure you’re making the most of tax and reporting efficiencies
At JVCA, the friendly accountants, we regularly help businesses navigate changes like these, making sure they’re fully compliant but not paying a penny more tax than they need to.
Want to chat about your business and how these changes affect you?
Whether you want to ditch the audit, review your accounting setup, or figure out how this all impacts IR35, we’re happy to help.
Email us at [email protected] for a free initial chat about your business and what these new small company and audit thresholds mean for you.
Because let’s face it, nobody wants to waste money on unnecessary admin!
