Impact of New Company Size Thresholds on Your Business

There’s encouraging news on the way for companies who are currently just over the UK’s official company size thresholds. From October 2024, the government plans to raise those thresholds. What does this mean? How will companies be affected?

The move has a distinct purpose. It aims to ease reporting and auditing burdens on small and medium-sized businesses. The new classifications will reduce the administrative load, allowing many firms to benefit from simplified financial reporting and exemptions from statutory audits.

In this blog, we’ll look at these changes and allow you to see how your company might be affected. Let’s begin by clarifying the new thresholds.

Remember – for your business to fit into one of these categories, it has to fulfil at least two of the three criteria. In other words, if your business’s turnover is £2,000,000 but has a balance sheet of £400,000 and employs 9 people, it will still be classified as a Micro Business.

Micro Business

Annual Turnover – Up to £1 million

Balance Sheet Total – Up to £500,000

Employees – Up to 10

Small Business

Annual Turnover – Up to £15 million

Balance Sheet Total – Up to £7.5 million

Employees – Up to 50

Medium Business

Annual Turnover – Up to £54 million

Balance Sheet Total – Up to £27 million

Employees – Up to 250

What are the implications of the changes in company size thresholds?

These new thresholds aim to simplify compliance for more UK businesses than is currently the case.

Micro businesses will benefit from submitting simplified accounts, reducing the complexity of their financial reporting.

Small businesses will gain exemptions from statutory audits, significantly cutting down on administrative burdens and associated costs. This change should make financial management more efficient and less time-consuming. It should allow them to focus more on their core operations and growth.

Charitable companies should note that at present their audit threshold remains at £1m, although they may benefit from reduced disclosures if they move from one size of business to another as a result of the change in thresholds.

How can my business prepare for these changes?

Your first job is to assess the new classifications and confirm your business’s current category. If your business will be shifting into a new category, you need to prepare before October 2024.

You’ll have to adjust your financial reporting processes to ensure compliance with the new regulations. This might involve –

1. Revising your internal accounting processes – adjusting financial reporting and accounting systems to align with the new requirements.
2. Training staff on new requirements – ensuring your finance and accounting teams are aware of and trained on the latest compliance requirements.
3. Consulting with financial advisors to fully understand and take advantage of the simplified reporting and audit exemptions.
4. Monitoring changes – staying informed about any further updates or consultations from the government regarding company size thresholds and
reporting requirements.

Are you ready for the upcoming changes to company size thresholds? Here at Dux Advisory, we certainly are! We’re in a great position to use our accountancy experience and know-how to give you all the support you need. We’re corporate tax experts and will help you to make the most of the threshold changes. We’ll keep you compliant, too.

Prepare today to stay ahead tomorrow. For tailored advice and assistance, get in touch.

We’re ready to help.