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In this guide, we explain the changes to 2025 audit exemption thresholds in the UK, who qualifies, and how it affects your company’s annual filing obligations. If you’re a director of a small or medium-sized business, these updates could mean time and cost savings — but only if you prepare now.
From April 2025, thousands of UK businesses will find themselves newly exempt from a statutory audit — but what exactly does this mean for your statutory accounts and financial reporting duties?
If you’re unsure how these new rules affect your company accounts, check our comprehensive Guide to Statutory Accounts for everything you need to know.
What Are the New 2025 Audit Exemption Thresholds?
The UK government is raising the thresholds that decide whether a company needs an audit of its annual accounts. These updated thresholds will apply to financial years beginning on or after 6 April 2025.
Here’s how the numbers are changing:
| Criteria | Previous Threshold | From April 2025 |
|---|---|---|
| Annual Turnover | £10.2 million | £15 million |
| Balance Sheet Total | £5.1 million | £7.5 million |
| Average Number of Employees | 50 | 50 |
If your business stays under these limits for two consecutive years, you could avoid the extra cost and admin of an audit.
Who Qualifies for Audit Exemption After 6 April 2025?
To claim an audit exemption, a company must be classed as ‘small’ under the Companies Act 2006 criteria by meeting at least two of the three thresholds listed above for two consecutive financial years.
A dormant company with no meaningful accounting activity during the financial year, or A subsidiary company where the parent company has provided a formal guarantee under Section 479A. Businesses That Must Still Be Audited
Important: Certain types of businesses, like insurance companies, banks and public interest entities, cannot claim audit exemption regardless of their size.
A note on dormant companies:
Dormant companies that are part of a group where any member is a public company, or where certain group guarantees haven’t been filed, may still require an audit. It is essential to check your specific circumstances with an accountant.
How Do These Changes Impact Your Statutory Accounts?
Even if you qualify for an audit exemption, you are still legally required to prepare and file company annual accounts with Companies House. The main difference is you won’t need to include an auditor report with those accounts.
However It’s important to remember that you’ll still need to meet all Companies House filing deadlines, and your statutory accounts must be accurate, complete, and fully compliant with UK reporting standards.
You’ll still need to report on turnover, assets, liabilities, and directors’ responsibilities.
Failing to submit these accounts correctly can lead to late filing penalties — even if no audit is required.
Internal Tip: If you are unsure about your position. IBISS & CO Statutory Accounts Guide explains which accounts you must still submit to Companies House.
Will FRS 102 Lease Accounting Affect Your Exemption Status?
Yes — and this is where some companies might get caught out.
Under FRS 102 accounting standards, leases are now recorded on your balance sheet as right of use assets. If your business has multiple property or equipment leases. This could increase your total gross assets and push you over the £7.5 million asset threshold.
Action Point: It’s a good idea to speak to your accountant about reviewing your balance sheet totals well before year-end, so you don’t unintentionally breach a threshold.
Should You Voluntarily Opt for an Audit?
Even if you’re exempt, some businesses still benefit from a voluntary audit.
Why?
- It can improve your credit rating with lenders and suppliers.
- It might help you win larger contracts or tenders.
- Audit provides reassurance for shareholders or other stakeholders.
- It can help reduce the risk of an HMRC investigation as audited accounts tend to carry additional credibility.
While an audit exemption means you are no longer legally required to have your accounts audited. Your business can still choose to do so if it benefits your operations, finances or future plans.
People Also Ask
From 6 April 2025. UK companies could qualify for an audit exemption if they satisfy any two out of the following three criteria.
- Turnover of £15 million or less
- A balance sheet total under £7.5 million
- No more than 50 employees on average.
Most private limited companies that stay within the revised size limits, dormant companies, and subsidiaries with a parent company guarantee. Financial services firms remain excluded.
Yes — as long as no significant accounting transactions have taken place during the year. However, if part of a group with a public company or without the required group guarantees, an audit may still be necessary.
Yes. even if your business qualifies for audit exemption, you are still legally required to prepare and submit Year end accounts to Companies House by the deadline. The only difference is you won’t need an auditor report alongside them.
The audit 2-year rule means most small UK companies don’t need an audit if they stay below certain size limits for two years in a row. As we write above section (What Are the New 2025 Audit Exemption Thresholds).
Final Thoughts
April 2025 changes to audit exemption thresholds are great news for growing UK businesses, keep in mind that statutory accounts preparation and filing remains a legal requirement for all limited companies audit or no audit.
If you are not sure whether your business qualifies for exemption or if you did like to review your annual accounts process before the new thresholds apply. Get in touch with IBISS & CO expert team today.
Or start by visiting our detailed Guide to Statutory Accounts for everything you need to know.
