Possibly not…
The world of UK business is constantly evolving, and the latest ripple causing a stir is the impending shake-up of audit thresholds. For many businesses, the annual audit is a significant undertaking, bringing with it both compliance burdens and, hopefully, valuable insights. However, for others, it can feel like an unnecessary expense and administrative hurdle.
The good news for some? The government has confirmed that the thresholds that determine whether a company needs a statutory audit have been raised. This could mean a significant number of businesses will soon be exempt from this requirement.
What are the new Audit Thresholds?
The new UK audit thresholds will come into force on 6th April 2025.
The key changes to the thresholds for a company to be considered small (and thus potentially exempt from audit) are increasing to meet at least two of the following criteria:
- Turnover: £15 million or less (currently £10.2 million)
- Balance Sheet Total: £7.5 million or less (currently £5.1 million)
- Number of Employees: 50 or less (remains the same)
These changes will first be applied to companies for financial years commencing on or after 6th April 2025. Therefore, companies affected by the changes will likely still need a statutory audit for the financial year 2024-2025. The new thresholds will then determine their audit requirements for the financial year 2025-2026 onwards.
Why the Change?
The primary driver behind the proposed increase is the government’s desire to reduce the regulatory burden on smaller and medium-sized enterprises (SMEs). The argument is that for many smaller companies, the cost and administrative effort of a statutory audit outweigh the benefits, especially if they have strong internal controls and limited external stakeholders.
The existing thresholds had been in place since 2015 and have not been adjusted to reflect inflation or any changes in the economic landscape over this period.
By raising the thresholds, the government aims to reduce costs for business, free up management time and to align with international standards.
What Does This Mean for Your Business?
If your business currently sits just above the existing thresholds the impact the changes mean that your business may no longer be legally required to have a statutory audit, leading to significant cost savings and reduced administrative burden.
If your business sits just below the audit thresholds and you don’t currently desire to have a voluntary statutory audit then you can breathe a sigh of relief, for now and can budget for this accordingly.
Of course, audits aren’t always bad news, there can be significant advantages to your business of having a regulated, external audit process and this is something you should still consider.
How we, at Rogers Spencer can Help you
We are specialists in producing Limited Company accounts for SME’s and provide proactive accounting and tax advice for you and your business. If you are dropping out of the audit eligibility criteria or are expecting to in the near future, we would be more than happy to discuss a quote for our services with you.
Please get in touch with our expert team for more information.
📞0115 960 8412
✉️advice@rogers-spencer.co.uk
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Robin Maxwell
Robin MaxwellRobin Maxwell is a partner of Rogers Spencer and has been working with us since 2003. Robin specialises in Accountancy Solutions, Audits and Tax and VAT. Find out more about Robin here.