The new UK audit thresholds: does your company still need an audit?
Thousands of UK companies that needed a statutory audit last year may not need one now. For financial years starting on or after 6 April 2025, the government raised the size thresholds that decide which accounts you prepare — and whether you need an audit — by roughly 50%.
The new thresholds
A company is small if it meets at least two of these three tests (ICAEW):
| Size | Turnover | Balance sheet total | Employees |
|---|---|---|---|
| Micro | £1m (was £632k) | £500k | 10 |
| Small | £15m (was £10.2m) | £7.5m | 50 |
| Medium | £54m (was £36m) | £27m | 250 |
The audit exemption stays tied to the small-company limits. Around 14,000 companies could move into the small regime and out of audit (Rödl & Partner).
The two-year rule has a one-off shortcut
Normally a company must meet the criteria for two consecutive years to change size. In the first year under the new limits, you can treat the previous year as if the new thresholds had already applied (ACCA). A company with £12m turnover last year and this year can be small immediately.
When you still need an audit
Meeting the numbers isn't always enough. You may still need an audit if:
- You're in a group that isn't small. Group size can override a subsidiary's own figures. Check consolidated turnover and assets, net and gross.
- You're a public company or in a regulated sector, such as certain financial services businesses.
- Shareholders ask for one. Members holding at least 10% of shares can require an audit.
- Your lender requires one under your facility agreement.
Should you drop your audit?
Not automatically. An audit is a cost, but it also does work for you. Consider keeping one, or switching to a lighter review, if:
- You plan to raise money or sell within two to three years — buyers and investors discount unaudited history.
- You have overseas parents or investors who need audited figures for their own reporting.
- Your FRS 102 lease and revenue changes are material this year and you want them independently checked.
If you do drop it, your controls matter more, not less. Nobody external is testing your numbers any more.
Your five-minute check
- 1.Confirm your first financial year starting on or after 6 April 2025.
- 2.Test turnover, balance sheet and headcount for this year and last.
- 3.Check group status, ownership and any regulated activity.
- 4.Read your loan and shareholder agreements for audit clauses.
- 5.Decide: statutory audit, voluntary audit, review, or exemption — and minute it.
How Step 1 Advisors helps
Our Audit & Assurance team assesses whether your UK entity is exempt, prepares audit-ready schedules and PBC lists, and liaises with your registered auditor so fieldwork runs to schedule. If you're exempt, we help you decide what level of independent assurance your lenders and investors still expect. Book a diagnostic call.