Proposed company size classification changes would see 113,000 small firms redefined as micro businesses

The government has confirmed its proposed increases to company size thresholds as part of efforts to reduce regulatory burdens on businesses.

First announced by prime minister Rishi Sunak on 18 March, small business minister Kevin Hollinrake revealed the full details in a written statement to Parliament.

He said that the proposals, which lift the monetary thresholds that determine company size by 50%, are aimed at making "the non-financial reporting framework smarter, simpler and better for business", with the "focus on reducing regulation on small and medium-sized companies, ensuring that reporting requirements are proportionate".

The changes would mean 5,000 large companies reclassified as medium, 13,000 medium-sized companies reclassified as small companies and becoming exempt to statutory audit requirements as well as being given the ability to file simpler accounts; and 113,000 small firms reclassified as micro-sized allowing them to submit simpler accounts.

The full proposals are in the table below. To be classified for each threshold, businesses must meet two of the three criteria:

The government intends to lay the legislation for the changes this summer and aims for the new size limits to apply to financial years starting on or after 1 October 2024.

Other deregulation changes

Hollinrake said the government also intends to remove "several low-value, obsolete or overlapping requirements from the directors' report, and from the directors' remuneration report and policy" to "make it easier for companies to issue digital annual reports, and fix some technical issues in the audit regulatory framework that have been identified following the assimilation of EU law into UK law".

Finally, the government intends to consult later this year on:

• increasing from 250 to 500 the maximum number of employees used in the definition of a medium-sized company for company reporting.

• exempting medium companies from having to produce a strategic report.

• exempting smaller public interest entities from audit tendering and rotation requirements.