Audit Threshold Changes

Following my post back in October 2024 which reported on the government’s commitment to follow through on plans to increase company size thresholds, we now have the legislation confirming the audit threshold changes and when they will be implemented.

What are the changes?

For financial years beginning on or after 6 April 2025, thresholds increase as follows:

This represents an increase of around 50% for the revenue and total/gross asset thresholds. The employee thresholds remain unchanged.

In group situations entities may choose to determine their size by applying gross or net thresholds. The latter being after adjustment for intercompany eliminations, if measuring on the net basis the above thresholds would still apply.

If choosing the gross thresholds, being before adjustment for intercompany eliminations, the thresholds have increased as follows;

How does it work?

In a company’s first year the accounts it prepares are based on whether its figures are over or under two of the three thresholds outlined above.

After a company’s first year, if its figures are under or over two of the three thresholds for two consecutive years, it gains or loses the right to prepare accounts of that size.

Why does it matter?

Below are some, but not all of the reasons why company size thresholds will affect your business:

• • As company size increases so does the level of disclosure required in its accounts both prepared for its shareholders but also those filed on public record. Small and micro entities are currently able to file filleted accounts at Companies House.

• • Small groups of companies are not required to prepare consolidated accounts

• • Small and micro entities do not generally require an audit, unless they are part of a larger UK/foreign group structure or is imposed on them by its shareholders, the bank or its articles of association

How can we help?

The rules around company size thresholds can be confusing, especially in group situations. Some growing clients may wish to look at changing their year end, to take advantage of the above changes as early as possible.  Your local Whitings team would be happy to assist you, should you have any questions on this topic.