Audit exemption thresholds change from April 2025

Most small companies enjoy an audit exemption. However, from April 2025 the audit exemption thresholds are changing. Government estimates that the new system will result in 14,000 companies moving from the ‘medium sized’ to the ‘small’ category. In most cases, this will mean they will no longer need to have an annual statutory audit.

What are the threshold changes?

Currently, if a company meets at least two of the following three criteria, it’s deemed to be medium sized. This means it is legally required to have an annual audit.

• Yearly turnover of more than £10.2 million
• Assets in excess of £5.1 million
• An average of 50 or more employees

However, from 6th April 2025, these criteria will change to the following:

• Yearly turnover of more than £15 million
• Assets in excess of £7.5 million
• An average of 50 or more employees

When do the audit exemption changes take effect?

The audit exemption thresholds change in April 2025. That means they will first be applied to companies for the financial year 2025-2026. In other words, affected companies will still need a final statutory audit for the financial year 2024-2025. Then they will be reclassified as a small company, probably not needing an audit.

Will all reclassified companies get an audit exemption?

Most, but not all, of the newly classified small companies will get an audit exemption.

However, it’s worth bearing in mind that some small companies will still need auditing. These include companies whose articles of association mandate an audit. They also include firms who have been requested to have an audit by shareholders owning at least 10% of shares.

Certain types of business are also required to have an audit, regardless of size. You can find out more in our article Statutory audit: does my limited company need one?

Can I still audit my business if it is exempt?

Even if your company is exempt from audit, you may choose to have one anyway. This is known as a voluntary audit. Audits are a good way to get reassurance your financial statements are likely to be free from material misstatement. They also help you identify and manage risk. Some companies choose to have audits to help them sell on a business or a significant number of shares in it. You can find out more about the benefits of an audit in our article, Understanding the purpose of an audit.

Where can I learn more about audit requirements?

At THP, we have been providing audit services to medium sized companies since the 1980s. If you would like help determining whether you need a statutory audit, a member of our friendly audit team can help you. If you’d like to know how much an audit is likely to cost your business, our audit fee calculator is an invaluable resource. In addition, we’ve compiled a list of audit FAQs that provides you with answers to many questions about the auditing process.

If you do decide to undertake an audit with THP, you can rest assured that we are on the Register of Statutory Auditors. We can also supply you with testimonials from satisfied clients on request.