For financial years beginning on or after 6 April 2025, a private limited company can normally claim audit exemption if it meets at least 2 of these 3 tests: annual turnover of no more than £15 million, assets worth no more than £7.5 million, and 50 or fewer employees on average. The previous limits were £10.2 million turnover and £5.1 million assets, so a meaningful band of companies has become exempt for the first time. The rules are on GOV.UK's audit exemptions for private limited companies page. Correct as at 4 August 2026.
The two-of-three test, old and new
| Test (meet at least 2 of 3) | Years beginning 1 Jan 2016 to 5 Apr 2025 | Years beginning on or after 6 Apr 2025 |
|---|---|---|
| Annual turnover | No more than £10.2 million | No more than £15 million |
| Assets (balance sheet total) | No more than £5.1 million | No more than £7.5 million |
| Average employees | 50 or fewer | 50 or fewer |
Watch the commencement wording: the new limits apply to financial years beginning on or after 6 April 2025. A company with a 31 March 2026 year end is still judged on the old thresholds for that year, because the year began on 1 April 2025, five days before the switch date. Its first year on the new limits is the one ending 31 March 2027. Checking this one date is the most common mistake in practice.
Who cannot claim exemption regardless of size
Some companies must be audited whatever their numbers: public companies, banks and insurers among others, as listed on the GOV.UK page. Two other overrides matter more often for owner managed companies. If your articles of association require an audit, the exemption is unavailable until the articles are changed. And shareholders holding at least 10% of the shares can demand an audit in writing, at least one month before the end of the financial year, and the company must then have one.
Exempt does not always mean audit-free is right
A fair number of companies that could claim exemption choose an audit anyway, for practical reasons. Lenders and credit insurers read audited numbers with more confidence. Buyers in a sale process take audited history at closer to face value, which shortens due diligence. Groups often need audited subsidiary numbers regardless. And where ownership and management have separated, even partially, an audit protects both sides. The decision is commercial: weigh the fee against what the assurance buys you with the people who matter to your plans.
Example
Example. A company runs a 31 December year end, with turnover of £12 million, assets of £4 million and 60 employees. For its year beginning 1 January 2025 (old limits), it fails the turnover test at £10.2 million and fails the employee test at 50, so only the assets test is met: an audit is required. For its year beginning 1 January 2026 (new limits), turnover of £12 million now passes the £15 million test and assets of £4 million pass the £7.5 million test: two of three met, so audit exemption is available for the first time, even though the employee count still fails. Whether to drop the audit is then a separate, commercial question, and in this company's case its bank facility documents required audited accounts anyway, so nothing changed in practice.
What to do now
Check three things against your next financial year: which set of thresholds applies given your year start date, whether your articles or any shareholder is likely to require an audit anyway, and what your lenders or investors actually expect. If exemption is newly available, decide deliberately rather than by default, and if you keep the audit, make it earn its fee as a source of insight rather than a compliance ritual.
Vision Consulting is a firm of Chartered Accountants and Registered Auditors, regulated by the ICAEW. Our audit page covers the service, and our accounting team handles the statutory accounts side for exempt companies.
Frequently Asked Questions
For financial years beginning on or after 6 April 2025: turnover of no more than £15 million, assets of no more than £7.5 million, and 50 or fewer average employees. A company needs to meet at least 2 of the 3 to claim exemption, subject to the usual exclusions.
The old ones (£10.2 million and £5.1 million), because that financial year began on 1 April 2025, which is before the 6 April 2025 switch date. Your first year under the new limits is the year ending 31 March 2027.
Yes. Shareholders holding at least 10% of the shares (or of any class of shares) can require an audit by writing to the company at least one month before the financial year ends.
Group companies are assessed on the group's aggregate position, and a company that is part of a larger, non-small group generally cannot claim the small company audit exemption. If you sit in a group, take the assessment as a group question, not company by company.
Not always. Banks, credit insurers, potential buyers and group parents often value audited numbers, and some facility agreements require them. Exemption gives you the choice; the decision should be made against your financing and exit plans, not just the fee saving.
Talk to our audit team
If you are unsure whether your company still needs an audit, or whether keeping one voluntarily makes sense, speak to David A White, Director and Head of Audit. The first conversation covers your year start date, the two-of-three position, and what your lenders and shareholders actually need. Call 020 8554 2135 or email info@visionconsulting.co.uk, or get in touch via our contact page.
By the Vision Consulting team.
This is general information, not advice. Your position depends on your circumstances.