Q: We run a business with a turnover of around £12.5 million for the last couple of years. Under the current rules, we’ve been classed as a medium-sized company. With the changes to the size thresholds from April 2025, will we be able to requalify as a small company again? And do the new rules apply to our 30 June 2025 accounts? We have a 30 June year-end.
A: On 6 April 2025, new company size thresholds came into effect for UK companies.
This is something that will affect many companies hovering around the various threshold limits. It’s important to note that these thresholds don’t’ pertain to Corporation tax or tax filing or VAT rates etc.
But they relate to financial reporting requirements, director reports and disclosure and, significantly, whether your company is exempt or not from statutory auditing.
Under the reforms, the small company turnover threshold has increased from £10.2 million to £15 million, meaning some companies that previously fell into the medium category may now be able to reclassify as small.
However, the timing of when these apply is key. The new thresholds apply to accounting periods beginning on or after 6 April 2025. Since your year-end is 30 June, your 2025 accounts (covering 1 July 2024 to 30 June 2025) began before the change, so you’ll still need to use the old thresholds for that year. The new thresholds will apply from your 30 June 2026 year-end onwards.
There is, however, a transitional provision within the new rules that you could potentially take advantage of. This means that when preparing your 2026 accounts, you can choose to apply the new thresholds retrospectively to both the 2026 and 2025 financial years—for the purpose of determining your company size.
So, if you take up that option, and your turnover stays at £12.5 million, you’d fall within the new small company limits. This could allow you to requalify as a small company for both 2025 and 2026, even though under the old thresholds, you were classed as medium.
That reclassification could reduce your reporting obligations, possibly remove the audit requirement, and simplify your filings.
If you’d like to understand more or discuss your case in greater detail, please get in touch with our team.
