Changes to Company Size Thresholds

24th March 2024 | Company Law

UK Government Announces Major Changes to Company Size Thresholds and Reporting Requirements

In a recent address, UK Prime Minister Rishi Sunak unveiled a series of ground-breaking measures aimed at simplifying regulatory obligations and enhancing corporate reporting efficiency. These changes, particularly focusing on non-financial reporting, mark a significant milestone in the government's ongoing efforts to alleviate the burden on businesses and foster a more conducive environment for growth and innovation.

Streamlining Company Size Thresholds

One of the key highlights of the announcement is the substantial increase of 50% in monetary thresholds that determine company size. This adjustment, slated to take effect for financial years commencing on or after 1 October 2024, promises to streamline the classification process for businesses. Micro entities, for instance, will witness a noteworthy rise in their turnover threshold from £632,000 to £1 million. Similarly, small companies will see their turnover threshold elevated from £10.2 million to £15 million. These adjustments aim to cater to the evolving landscape of the business ecosystem while ensuring that reporting requirements remain pragmatic and reflective of economic realities.

Relief for Businesses:

The government estimates that approximately 132,000 businesses will benefit from reduced non-financial reporting requirements as a result of these changes. Moreover, plans are underway to streamline annual reporting obligations and facilitate digital filing processes, further alleviating administrative burdens on businesses and promoting operational efficiency.

Future Consultations and Initiatives:

Looking ahead, the government has signalled its intent to conduct further consultations on refining company reporting requirements. Proposed amendments include revising the definition of medium-sized companies and exploring exemptions for strategic reporting. Additionally, there are considerations to exempt smaller public interest entities from certain audit obligations, paving the way for a more tailored regulatory landscape.

Beyond Reporting: Support for Apprenticeships: 

In addition to regulatory reforms, the Prime Minister also unveiled initiatives aimed at bolstering skills development and fostering workforce productivity. Starting from 1 April, small businesses will receive full funding for apprenticeships, covering the entire cost of training for individuals under the age of 21. Furthermore, there will be an increase in the flexibility of funding transfers for levy-paying employers, enabling greater collaboration in addressing skills gaps and nurturing talent across industries.

In essence, the recent announcements by the UK government herald a new era of corporate reporting and regulatory compliance. By recalibrating company size thresholds and embracing digital transformation, policymakers aim to empower businesses, drive innovation, and nurture a resilient economy for generations to come.