As a reminder, the updated company size thresholds announced by the government are now beginning to apply.

For accounting periods starting on or after 6 April 2025, the thresholds defining a small company—potentially exempting businesses from mandatory audits—have increased. Higher thresholds determine whether a company is classified as small, medium or large. These changes will affect audit exemption rules and financial reporting obligations.

Updated company size thresholds

To qualify as a small company, a business must meet at least two of the following:

• Turnover: £15 million or less (previously £10.2 million)
• Balance sheet total: £7.5 million or less (previously £5.1 million)
• Average number of employees: 50 or fewer (unchanged)

To qualify as a medium-sized company, a business must meet at least two of:

• Turnover: £54 million or less (previously £36 million)
• Balance sheet total: £27 million or less (previously £18 million)
• Average number of employees: 250 or fewer (unchanged)

These changes will affect how companies are classified as small, medium or large, and in turn, whether an audit is required.

Impact for business’

Thousands of UK businesses, particularly SMEs, will benefit from reduced compliance obligations and potential cost savings. Many companies previously requiring annual audits will now be exempt. Additionally, eligible companies can enjoy simplified financial reporting requirements, reducing administrative burdens.

However, some businesses—such as those part of larger groups or public interest entities—may still require audits regardless of their individual size.

Should your business still opt for an audit?

Audit exemption can save resources, but audits continue to offer significant benefits. Audited financial statements can strengthen credibility with banks, investors, and stakeholders, assist in identifying internal control issues, and may remain a contractual or investment requirement. Carefully evaluate your business’s specific needs before deciding to opt out of audits.

What you need to do

Companies that now fall below the updated audit thresholds may no longer require a statutory audit, which could reduce compliance costs. However, some businesses may still need or choose to have one—for example, due to group reporting, investor requirements or shareholder requests.

Other points to note

These thresholds also apply to group classifications, meaning parent companies must assess group-level figures to determine whether consolidated accounts or a group audit are required. A

change in size status is confirmed only after meeting the criteria for two consecutive financial years, unless it’s the company’s first year of trading.

We’re actively reviewing how these changes impact our clients. If you’re unsure whether you still meet the audit criteria under the new thresholds, please speak to your usual bk plus adviser or contact us.