Following on from the Budget on 6 March 2024, the Government has announced that, for financial years starting on or after 1 October 2024, the monetary thresholds for measuring the size of companies will change. This change is intended to reduce the regulatory burden on companies, particularly in relation to non-financial reporting.
In the same speech, on 18 March 2024, the Government announced an increase in funding for apprenticeships. We’ve explained these legal newsflashes further below.
What are the current financial thresholds for company sizes?
When determining what type of financial reporting is required for your company, you’ll need to consider its size. You should talk to an accountant to make sure you comply with all your legal obligations. The current size thresholds for companies are:
Large companies
Currently, your company will be a large company if you meet two or more of the following in the current financial year and, unless this is your first year, the previous one too:
- Turnover of more than £36 million
- Aggregate amount of assets in your balance sheet is more than £18 million
- More than 250 employees (taken as an average over the year)
Medium-sized companies
Your company will be a medium-sized company if you meet two or more of the following in the current financial year and, unless this is your first year, the previous one too:
- Turnover of no more than £36 million
- Aggregate amount of assets in your balance sheet is no more than £18 million
- Not more than 250 employees (taken as an average over the year)
Small companies
Your company will be subject to the small companies regime if you meet two or more of the following in the current financial year and, unless this is your first year, the previous one too:
- Turnover of no more than £10.2 million
- Aggregate amount of assets in your balance sheet is no more than £5.1 million
- Not more than 50 employees (taken as an average over the year)
Micro-entities
Your company will be a micro-entity if you meet two or more of the following in the current financial year and, unless this is your first year, the previous one too:
- Turnover of no more than £632,000
- Aggregate amount of assets in your balance sheet is no more than £316,000 ; and/or
- Not more than 10 employees (taken as an average over the year)
Turnover and asset value are potentially complex financial calculations. You should obtain expert accounting advice unless your situation is straightforward.
What are the new size thresholds?
If the new measures are adopted:
- Micro-entity thresholds will move from not more than £632,000 turnover to not more than £1m, and the balance sheet asset threshold from £316,000 to £500,000
- For small companies, the threshold will increase to not more than £15m turnover and the balance sheet asset threshold from £5.1m to £7.5m
- The medium-sized company threshold will move to not more than £54m, and the balance sheet asset threshold from £18m to £27m
If your company’s entity type changes under these new rules to become a smaller company, your filing obligations will become less onerous. For example, micro-entities are not required to file a directors’ report, and annual reports can be provided in simple ‘micro-entity’ format if preferred. Small and micro-entities are not required to provide a confirmation statement or have their accounts audited, unlike medium-sized or large companies.
For more guidance on annual filings, accounts and reports, see our Q&A.
What else did the Government announce?
In the same speech, the Government also announced that the government will fully fund apprenticeships in small businesses from 1 April, paying the full cost of training for anyone under the age of 21. The government will also increase the amount of funding that can be passed on to other businesses from employers that pay the apprenticeship levy. Apprenticeships can currently be funded by a levy-paying employer transferring up to 25% of their unused levy to another employer. Under the new measures, large levy-paying employers will be able to transfer up to 50% of their funds to support other businesses to take on apprentices.
For more guidance on apprenticeships, see our Q&A.
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Marion joined Sparqa Legal as a Senior Legal Editor in 2018. She previously worked as a corporate/commercial lawyer for five years at one of New Zealand’s leading law firms, Kensington Swan (now Dentons Kensington Swan), and as an in-house legal consultant for a UK tech company. Marion regularly writes for Sparqa’s blog, contributing across its commercial, IP and health and safety law content.