Company size thresholds to change

On 18th March 2024, Rishi Sunak delivered his first economic speech since the Budget. In it he outlined two measures that will be of interest to businesses. Firstly, he announced that company size thresholds will change, simplifying both financial and non-financial reporting for many firms. Secondly, he said that government will fully fund apprenticeships for people under 21.

What are company size thresholds?

Government classifies businesses as belonging to one of four types: micro, small, medium and large.

Each category of business has different reporting requirements. While all businesses need to submit reports to Companies House, the content of the reports are determined by a company’s size. For example, medium and large businesses need to provide a strategic report, while all businesses except for micro-entities need to submit a directors’ report.

What are the current company size thresholds?

The current and proposed company size thresholds are set out in the two tables below.

Current company size thresholds

Proposed company size thresholds

As you can see, there’s a 50% uplift to these thresholds. The government anticipates that this will “benefit up to 132,000 businesses who will be spared from burdensome form-filling and non-financial reporting requirements.”

This figure can be broken down into:

• 5,000 large companies being classed as medium, resulting in less onerous reporting
• 13,000 medium companies being classed as small, allowing them to file simpler accounts and potentially benefit from audit exemption
• 113,000 small companies being reclassified as micro-entities, allowing them to prepare simpler accounts.

Changes to reporting requirements

The government intends to consult on changes to reporting requirements. Proposals include:

• Removing overlapping requirements from directors’ reports and directors’ remuneration reports
• Making it simpler for companies to provide digital reports
• Exempting medium-sized companies from providing a strategic report

When will the changes take place?

The government hopes that the changes will be available to companies with a financial year beginning on or after 1st October 2024.

What are the government’s apprenticeship proposals?

In addition to new company size thresholds, the Prime Minister announced a significant change to apprenticeships.

Essentially, the government is investing an extra £60m. It will use this money to fully fund apprenticeships by paying the entire cost of training anyone under the age of 21. It will also increase the amount of funding that employers who pay the apprenticeship levy can pass on to other businesses. At the moment, an employer can pass on up to 25% of their unused levy to another business. This will increase to 50%.

Both of these measures come into force on 1st April 2024. The government expects that the changes will result in an additional 20,000 apprenticeships.

My company size threshold will change. What should I do?

If your company size threshold will change under the government’s proposals, you don’t need to do anything just yet. Firstly, the changes won’t take effect until after a government consultation. However, if your reporting requirements do change after the changes take effect, your THP account manager will advise you.