There are significant changes proposed under the Economic Crime & Corporate Transparency Act 2023 (ECCTA) for how companies report their financial information and what financial information they must publicly report. This will particularly affect small and micro entities and the filing of their accounts, as these companies have, to date, been able to file public accounts with minimal information. The changes are designed to address the insufficient (and sometimes inaccurate) financial information currently on the companies register.

What is changing?

Companies House (CH) has stated that from 1 April 2027, the following will take effect:

• Digital only filing: all companies will be required to file accounts using commercial software. CH will close its paper and web-based filing routes for accounts filing (it will remain open for other statutory filings).
• Small company accounts: the option for small companies (and micro entities) to file abridged accounts will be removed and instead all small companies will be required to submit full accounts, including a balance sheet, profit and loss account, directors' report and auditor’s report (unless exempt).
• Micro-entity reporting: micro-entities will be required to file annual accounts, which will include a balance sheet and profit and loss account. Filing a directors’ report will remain optional.
• Audit exemption: a company claiming an audit exemption will be required to provide an enhanced statement from their directors on the balance sheet, specifying the exemption being claimed and confirming the company is eligible for it.
• Accounting reference period changes: there will be a limit on the number of times that a company can shorten its accounting reference period. Currently, a company can change an accounting reference period as many times as it likes. From 1 April 2027, companies shortening their accounting reference period more than once in five years will need to provide a business reason.

As of 6th April 2025, company size thresholds changed. A company is classified as a micro-entity, small, medium or large by reference to its turnover, balance sheet total and number of employees. It will fall into the next category up of it crosses two of the three thresholds for that category. The Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024 applies to financial years beginning on or after 6 April 2025. The Regulations increase the monetary thresholds but not employee thresholds. The following adjustments now apply to small & micro-entities:

• Small entities – the turnover threshold increased from £10.2 million to £15 million, and the balance sheet threshold increased from £5.1 million to £7.5 million. The number of employees remains at 50 employees or fewer.
• Micro-entities – the turnover threshold increased from £632,000 to £1,000,000 and the balance sheet threshold increased from £316,000 to £500,000. The number of employees remains at 10 employees or fewer.

Many companies may therefore be able to move down a size category and be entitled to the accompanying reduction in reporting requirements.

Companies will need to consider how their published accounts will meet the new requirements, particularly if they have been abridged or filleted to date. In addition, companies may also need to consider what any increased public financial transparency may mean for their customers, suppliers, lenders, investors, and employees who may have greater visibility of company accounts going forward. The ECCTA includes provisions which allow the Registrar to make the profit and loss accounts of small or micro-entities unavailable for public inspection and this may provide some relief for those concerned about trading information becoming publicly available. 

Whilst changes to company accounts will not be among the first measures to be in force under the ECCTA, companies would be advised to start planning for these changes and make sure that they have all necessary information and systems in place to comply with the new regime by 2027.