UK Audit Thresholds: Is Your Business Ready for the Changes?

The revised company audit thresholds came into force in April 2025, but for many businesses, the practical impact is happening right now.

For companies with March year-ends – one of the most common accounting periods in the UK – this is the first financial year affected by the changes. Directors and shareholders have just weeks to finalise decisions about audit requirements, voluntary assurance, and stakeholder communication.

If your year-end falls later in 2026, you have more time – but preparation should start now.

What's changed?

Higher company size limits (around a 50% increase)

The monetary thresholds for micro, small and medium-sized entities have risen significantly:

Micro-entity

• Turnover up to £1.0m (previously £632k)
• Balance sheet total up to £500k (previously £316k)

Small company

• Turnover up to £15m (previously £10.2m)
• Balance sheet total up to £7.5m (previously £5.1m)

Medium-sized company

• Turnover up to £54m (previously £36m)
• Balance sheet total up to £27m (previously £18m)

Employee thresholds remain unchanged (≤10 for micro, ≤50 for small, ≤250 for medium).

Audit exemption follows size

Companies that now qualify as small under the revised thresholds will generally be exempt from a statutory audit, unless an audit is required by:

• Group structure
• Articles of association
• Lenders or investors
• Sector-specific regulation

Groups benefit too

Group (gross) thresholds have also increased. This means more subsidiaries may fall outside mandatory audit requirements where the group qualifies for the small companies' regime, subject to eligibility conditions.

Fewer companies in audit scope

Thousands of companies are expected to move out of mandatory audit, reducing compliance costs. However, this also removes an element of independent assurance that some stakeholders — including banks, investors and suppliers — continue to value.

What directors and shareholders should focus on now

• Reassess company and group size classifications under the new thresholds
• Consider whether a voluntary audit remains beneficial
• Review internal controls, reporting and governance if stepping away from audit
• Communicate clearly with stakeholders about any change in audit status

Time-critical for March year-ends

If your company has a March 2026 year-end, you're in the first affected accounting period. Decisions about whether to retain a voluntary audit need to be made before your year-end, not after.

For businesses with later year-ends, now is the time to review your position, discuss options with your audit committee or board, and plan stakeholder communications.

While reduced regulation may ease compliance burdens, it also places greater responsibility on directors to ensure robust financial reporting and governance standards are maintained.

Key questions to consider

• Does your company qualify for exemption under the new thresholds?
• Will your stakeholders still require audit assurance?
• Are your internal controls strong enough without external oversight?

Is your business ready?

If you'd like to understand how the new audit thresholds apply to your company or group, and whether retaining audit assurance still makes sense for your stakeholders, our team at Ballards can help you assess the options and plan ahead with confidence.

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