Audit Exemption and Thresholds

Companies may qualify for audit exemption under UK law if they fall into one of the following categories:

1. Dormant Company

A company that has no trading activity and no income (except potentially from investments) may be exempt.

2. Small & Stand-alone Company

A company is considered small if it meets at least two out of three thresholds in both the current and previous financial years:

• Turnover ≤ £10.2 million
• Balance sheet total (total assets) ≤ £5.1 million
• Employees ≤ 50

This applies even in the first financial year, and if the company was previously audited, it must meet the criteria for two consecutive years to qualify for exemption.

3. Small Member of a Group

For group companies, the same small‑company criteria apply. Additionally, the group must meet two of the three thresholds, either on:

• A net basis (consolidated accounts), or
• A gross basis (sum of individual accounts, without inter-group adjustments).

Thresholds:

As above, the two-year rule applies.

4. Subsidiary with UK Parent Guarantee

Any-size subsidiary may be exempt if a UK-established parent company provides an indefinite guarantee for its liabilities and:

• The subsidiary is included in the parent’s consolidated accounts, and
• The guarantee is publicly disclosed and filed with Companies House in accordance with section 479A of the Companies Act 2006.

🔍 Ineligible Groups

A group or company is not eligible for audit exemption if any member is:

• A traded company or has shares on a regulated market (e.g., public limited company),
• An e‑money issuer,
• An authorised insurance company, banking company, MiFID investment firm, or similarly regulated entity.

✨ What’s Changed: New Thresholds (From 6 April 2025)

From 6 April 2025, the small-company thresholds are increasing - meaning more businesses may qualify for audit exemption:

Transitional provisions may allow companies to benefit from the new thresholds sooner, even if they previously exceeded the old ones.