Changes lie ahead that could reduce reporting requirements for thousands of companies.
The Government has published new legislation to increase company size thresholds, which determine whether a company requires a statutory audit, by 50% from 6 April 2025. As a result, for an estimated 132,000 businesses their audit will no longer be compulsory.
The date this impacts companies will depend on their year end. For example, for those with a December year end, the first affected period will begin on 1 January 2026 and will end on 31 December 2026. Similarly, for companies with a March year end, the first period commences 1 April 2026 and ends 31 March 2027.
Confirmed audit threshold changes
The turnover threshold will increase to not more than £15m turnover, from £10.2m
The balance sheet total thresholds would increase to not more than £7.5m
The employee number threshold remains at 50
While the benefits this will bring include reduced costs and removes a regulatory burden for many, other valuable benefits an audit provides will also be lost. Having an audit is not just a box-ticking process and can add value in many ways.
How does an audit benefit your business?
An audit not only reviews a company’s financial records and ensures it complies with regulatory requirements. It can identify opportunities for growth, protect jobs, and improve internal control processes as well as improve a business’s reputation, protect the value of the business and make it easier for companies to access financing and investment.
If, as a result of the proposed changes, your company would no longer require a statutory audit, it is worth considering the wider impact this will have on your business, rather than simply looking at the cost savings you will make.
Impact on growing businesses
Where a business is quickly expanding and may initially be removed from the requirement to be audited but then in a few years could breach the new threshold, extra consideration will be necessary.
Fast-growing businesses in particular will need to focus on ensuring that their internal control environment is properly structured to allow them to deal with growth. They may require additional access to funding and may realise a greater benefit of an audit than more mature businesses.
If you would like further advice and support about how these changes could impact your business, or you would like to know more about what an audit is and does, and how it can add value, please get in touch. Call 0808 144 5575 or email help@armstrongwatson.co.uk.
