Micro Entity Accounts: Rules and 2025 Changes

Micro Entity Accounts: Rules, Filing and 2025 Changes

Micro entity accounts provide a simplified accounting framework for the smallest UK companies. Designed to ease the administrative burden, they allow qualifying businesses to file reduced accounts with Companies House while still meeting legal requirements. These accounts are based on a specific definition set out in company law, and the criteria for qualification are changing from 2025.

What Are Micro Entity Accounts?

Micro entity accounts are the most simplified version of statutory accounts that a UK company can prepare and file. They were introduced under the Companies Act 2006, with additional guidance from the Financial Reporting Standard 105 (FRS 105). This format is designed for very small businesses that meet strict eligibility criteria.

The benefits of using micro entity accounts include reduced disclosure requirements, no obligation to file a profit and loss account publicly, and simpler balance sheet notes. These accounts still need to show a true and fair view but can omit certain details that larger companies must provide.

What Is the Difference Between Micro and Small Entity Accounts?

The key difference lies in complexity and the volume of required disclosures. Small entity accounts (prepared under FRS 102 Section 1A) include a full balance sheet, profit and loss account, and a directors’ report, although they can still be abridged in some cases.

Micro entity accounts, by contrast, offer the minimum possible level of reporting. They allow:

• A simplified balance sheet format

• No public profit and loss account

• Very limited footnotes

• No need for a directors’ report

Micro entities file less information, saving time and reducing public exposure of financial detail.

What Must Be Met to Classify as a Micro Entity?

To qualify as a micro entity under current rules (before 2025 changes), a company must meet two out of three of the following conditions:

• Annual turnover of £632,000 or less

• Balance sheet total of £316,000 or less

• 10 employees or fewer on average

The company must also not be part of a group that exceeds these thresholds and cannot be a public company, investment undertaking, or certain types of financial institutions.

What Were the Changes to the Micro Entity Qualification in 2025?

From April 2025, the UK government is implementing reforms to company reporting thresholds in line with economic growth and inflation. These include changes to both turnover and balance sheet criteria.

For micro entities, the revised thresholds will be:

• Turnover: up to £1 million

• Balance sheet total: up to £500,000

• Still limited to 10 employees

These updates aim to allow more small businesses to benefit from the simplified reporting regime. Companies previously just above the limits may now fall within scope and can opt to file micro entity accounts if they meet the conditions.

What Must Be Included in Micro Entity Accounts?

Even though the requirements are lighter, micro entity accounts must still include:

• A balance sheet, signed by a director, with a statement that the accounts are prepared under the micro-entity provisions

• Any mandatory notes to the accounts, which are minimal under FRS 105

• A statement of financial position in the approved format

Micro entities are not required to include:

• A profit and loss account (if choosing not to file it publicly)

• A directors’ report

However, these documents may still be prepared internally to satisfy management or stakeholders.

What Are the Requirements to Be Defined as a Small Company?

To qualify as a small company (the tier above micro), a business must meet at least two of the following:

• Turnover: not more than £10.2 million

• Balance sheet total: not more than £5.1 million

• Average number of employees: 50 or fewer

As with micro entities, a company must not be part of a larger group that exceeds these thresholds. Certain exclusions also apply, such as public companies and regulated entities.

What Are the Legislative Changes for Small Companies in 2025?

From April 2025, small company thresholds are being updated. The new thresholds will be:

• Turnover: up to £15 million

• Balance sheet total: up to £7.5 million

• Employees: up to 50

These changes are expected to bring more medium-sized businesses under the “small company” definition, allowing access to simpler accounts formats and reduced filing obligations.

How Do You File Micro Entity Accounts?

Micro entity accounts are submitted to Companies House, either online via the Companies House web service or through approved accounting software. They must be filed within nine months of the company’s financial year-end.

To file, you’ll need:

• The signed balance sheet

• Any required notes

• A statement confirming that the accounts are being prepared under the micro-entity provisions

• Company authentication code for online filing

Filing these accounts satisfies both the legal requirement for statutory reporting and helps avoid late filing penalties.

Conclusion

Micro entity accounts offer a streamlined reporting route for the UK’s smallest businesses, keeping compliance light and costs low. The 2025 changes to the threshold criteria will allow more companies to benefit from this format, making it even more relevant for start-ups, freelancers, and small limited companies. Understanding the differences between micro and small company definitions—and staying on top of eligibility changes—is key to choosing the right reporting path and avoiding unnecessary administrative burden.