This summer, legislation goes before parliament to increase the monetary company size threshold by around 50%, with its intended effective date to be for period beginning on or after 1 October 2024.
There are four size categories set out by Companies House; micro-entity, small, medium-sized and large. Each have three criteria (turnover, balance sheet total and number of employees) and to ‘meet’ the size, two out of the three criteria must be met, either initially in year one or if later on, for two consecutive years.
This increase is supposed to reduce complexity for preparing company accounts, with expected impact to make 13,000 medium sized companies now fall into the small company category. As well as some reduced disclosure, it could mean (in some cases) that they fall out of the statutory audit requirements which will be a large cost saving.
As with any regulatory change this doesn’t mean it will be helpful to every company. What about if you are growing rapidly? The increase in threshold may temporarily mean you drop down to a smaller category this may actually be more disruptive to change your reporting processes in place when it will only be for a short period of time.
There are other things to consider linked to this, like filing requirement changes due for small and micro-entities in the next year or so, and the latest updates to FRS 102 1A requiring more minimum disclosures from 1 January 2026 – never a dull day!
Details of the proposed size threshold changes are as follows:
Micro entity – Turnover size from £632k to £1m, balance sheet total from £316k to £500k.
Small employees – Turnover size from £10.12m to £15m, balance sheet total from £5.1m to £7.5m.
Medium-sized employees – Turnover size from £36m to £54m, balance sheet total from £18m to £27m