Upcoming changes to UK audit thresholds - what businesses need to know

From 6 April 2025, the thresholds determining whether a company requires a statutory audit in the UK are set to increase. This change, introduced by the Government, is aimed at reducing regulatory burdens on small and medium-sized businesses. While this will exempt more companies from mandatory audits, it is essential for business owners and finance leads to understand the implications and plan accordingly.

Why are the changes being introduced?

The Government has decided to increase the audit thresholds as part of broader efforts to support business growth and ease financial and administrative obligations. By raising the thresholds, the government aims to reduce costs for SMEs, allowing them to focus on expansion and investment.

What are the new audit thresholds?

Currently, companies must undergo a statutory audit if they meet two of the following three criteria:

• Annual turnover of more than £10.2 million
• Gross assets exceeding £5.1 million
• More than 50 employees

From 6 April 2025, these thresholds will increase to:

• Annual turnover of £15 million
• Gross assets exceeding £7.5 million
• More than 50 employees

Companies exceeding two of these new criteria will still require an audit, but many that previously needed one will no longer be obligated.

Who will be affected?

The new thresholds will impact businesses that are currently just above the existing audit criteria. Those that now fall below the new limits may no longer need an audit. However, some businesses, including regulated entities such as those authorised by the Financial Conduct Authority (FCA), will not be affected by the changes and must still comply with existing audit requirements. This includes insurance brokers, which may require a client money audit rather than a full statutory audit.

Additionally, charities have separate audit thresholds, and these changes do not apply to them. Trustees and finance teams in charities should ensure they continue to meet their specific audit requirements.

What do businesses and their auditors need to consider?

For businesses close to the current thresholds, it is possible that an audit may be required for just one year before falling below the new limits. This is because the changes apply to accounting periods starting on or after 6 April 2025. If a company is growing and expects to exceed the current limits before the new ones take effect, they may need to consider whether changing their financial year-end could help them manage this transition.

Furthermore, businesses below the new thresholds should still assess whether an audit is beneficial. Many lenders, investors, and stakeholders require audited financial statements, even when not legally mandated. External assurance can enhance credibility, strengthen governance, and improve financial oversight.

Alternatives to a full audit

If a company is no longer required to have a statutory audit, other financial assurance options can provide value, such as:

• Assurance reviews – a lighter-touch review that offers a level of credibility without the full scope of an audit
• Agreed-upon procedures – specific financial checks tailored to stakeholder requirements
• Internal audits – providing governance and operational insights beyond financial reporting

Planning ahead

With the threshold increase approaching, business owners and finance leaders should review their audit obligations now. Engaging with an auditor early will help assess whether an audit is still needed, what alternative services may be beneficial and how to manage the transition.