If you run a small Limited Company in the UK, you might qualify to prepare micro-entity accounts. These accounts are simpler and cheaper to produce than full company accounts, which makes them an attractive option for start-ups, small consultancies and single traders operating through a Limited Company.

However, not everyone can use the micro-entity regime, and you still need to file correctly with both Companies House and HMRC.

In this article, we’ll explain exactly who qualifies, who doesn’t, what the thresholds are, and how to prepare and file these accounts.
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First off, what are micro-entity accounts?

Think of micro-entity accounts as a simplified version of statutory accounts. Only very small companies meet the requirements to qualify for the micro-entity regime. The idea is to lighten the administrative burden on the smallest businesses so they only need to disclose the minimum information required by law. 

How are they different from normal accounts?

Compared with the full statutory accounts, micro-entity accounts are much less detailed and easier to produce.

In practice, micro-entity accounts usually include:

• A simplified balance sheet that meets the minimum regulatory requirements.
• A profit and loss account (though this might not be publicly filed, depending on exemptions).
• Limited notes to the accounts.
• A director’s signature on the balance sheet and appropriate declarations.

They do not require a directors’ report to be filed at Companies House and, if eligible, the company can claim audit exemption.

Remember, this regime applies to preparing and filing company accounts for Companies House. You still need to prepare full accounts for HMRC as part of your Corporation Tax return (CT600), even if you file micro-entity accounts with Companies House.
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Who qualifies as a micro-entity?

Not every small company automatically qualifies, so it’s important to check the specific legal criteria before preparing micro-entity accounts.

Size thresholds

To qualify for filing micro-entity accounts, your company must meet at least two of the following three conditions for the financial year in question:

• Annual turnover of £1 million or less.
• Balance sheet total of £500,000 or less (this means total assets).
• An average number of employees is not more than 10.

The two-out-of-three test is standard practice and means you don’t have to meet all three criteria, just two of them. So, for example, a business with a £900,000 turnover, with £480,000 in assets but 12 employees, would still qualify. 

These thresholds apply to accounting periods starting on or after the 6th of April 2025. If your accounting period began before that date, the old thresholds apply.

What were the old thresholds?

The previous thresholds that applied were an annual turnover of £632,000 or less, a £316,000 balance sheet total or less, and 10 or fewer employees. 

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First year and subsequent years

In your company’s first financial year, you can qualify as a micro-entity if you meet two-out-of-three criteria for that year. For subsequent years, you must meet the criteria in both the current and previous financial year to continue filing micro-entity accounts, unless you re-qualify after a temporary breach.

Types of companies that do not qualify

Even if your company meets the size tests, some companies are not allowed to file micro-entity accounts under the regime. 

• Public Limited Companies (PLCs).
• Charitable companies (even if small).
• Certain financial institutions and regulated entities.
• Companies that are members of groups that must prepare consolidated accounts.
• Overseas or unregistered companies.
• Limited partnerships or qualifying partnerships under specific regulations.

These exclusions are set out in the Companies Act 2006 and associated regulations. The broad rule is that if your business is subject to more complex reporting obligations or is not a standard Private Limited Company, you will not be eligible for the micro regime.
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Why would you choose the micro regime?

If your company qualifies, micro-entity accounts can make statutory reporting more straightforward. Particularly if you’re struggling with the responsibilities that come with being a Limited Company director.

Here are the main advantages:

Bear in mind, though, that simpler reporting can also mean less useful information for lenders or investors. If you plan to seek external finance, the stripped-back format might not give them enough details to make a decision.
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Preparing micro-entity accounts: step by step

Here’s how to set up micro-entity accounts that comply with the law.

1. Maintain good records

The key to preparing any set of accounts is to make sure your accounts are accurate and up-to-date throughout the year.

Things to track:

• All income and sales.
• All expenses, with receipts and invoices. 
• Assets owned by the business and any depreciation.
• Liabilities, including loans and unpaid bills.

Keeping digital records in accounting software (like Crunch!) makes later preparation much easier. HMRC expects you to retain records for a minimum period, typically six years. This is another reason why keeping digital records is a benefit, because nobody wants the dreaded box room full of paperwork.

2. Choose the correct accounting standards

Micro-entity accounts must be prepared under the UK accounting standard known as FRS 105 (The Financial Reporting Standard applicable to the Micro-entities Regime). FRS 105 is tailored to the needs of very small companies and recognises that the detailed disclosures required in larger company accounts are not necessary here.

3. Prepare the balance sheet

The balance sheet shows that the company owns and owes at the end of the financial year. For a micro-entity, this is a simplified balance sheet that meets statutory minimum requirements. 

You must include a statement on the balance sheet confirming:

“The accounts have been prepared in accordance with the micro-entity provisions and have been delivered in accordance with the provisions applicable to companies subject to the small companies regime.”

The balance sheet then needs the signature and printed name of a director.

4. Prepare the profit and loss account

Your profit and loss account summarises the sales, costs, and profit or loss for the year. Under the micro-entity regime, this also follows simplified rules, but you must still provide sufficient detail to support the numbers in your tax return.

5. Consider whether to file notes or the directors’ report

Micro-entity accounts do not require a directors’ report to be filed at Companies House, although you can include one voluntarily. Notes to the account are usually minimal under FRS 105.

6. Audit considerations

If you are eligible for audit exemption, you do not have to have your accounts audited. But some companies are required to have an audit (for example, certain regulated companies). Make sure you check whether this applies to you.

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Filing these accounts

Once your micro-entity accounts are prepared, you need to file them with Companies House by your filing deadline.

When is the deadline for micro-entity accounts?

It’s determined by the filing deadline for your business. This is normally nine months after your accounting reference date (the end of the financial year). You need to make sure they’re filed either through the Companies House WebFiling service or through compatible accounting software.

How do I know if the accounting software is compatible?

The accounting software needs to support iXBRL tagging. It might look like a random keyboard smash, but it stands for Inline eXtensible Business Reporting Language. It basically means that the software will ensure your accounts are machine-readable. Most modern accountancy software will automatically tag your financial statements for you. 

Missing the filing deadline

It’s crucial that you do not forget to file your micro-entity accounts on time, because missing the deadline can bring automatic penalties. Late filing penalties start at £150 and go up depending on how late the accounts are. So put a reminder in your calendar to make sure you don’t miss it.

Want more information on how and when to file your company accounts? Check out our article covering when and how to file company accounts.
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Common questions and pitfalls

Does filing micro-entity accounts impact what I file with HMRC?

Even if you file micro-entity accounts at Companies House, you’ll still need to file a Company Tax Return (CT600) with HMRC. This will usually involve providing a full set of financial figures to support your tax computations. So while you’ll get a simplified version of filing for Companies House, you’ll still need to carry out your normal tax filing obligations.

What if my company becomes too large during the year?

If you stop qualifying as a micro-entity, you will need to prepare accounts under the small company regime or full accounts. However, in many cases, you can continue with micro-entity reporting if it’s only a temporary exceeding of the limit.

Can I prepare these accounts myself?

Yes, you can. But many business owners find it helpful to use an accountant like Crunch. Preparing statutory accounts requires care and accuracy, and mistakes can lead to penalties or compliance issues. For many directors, outsourcing this frees up time to focus on running the business. 
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To micro or not to micro, that is the question

Micro-entity accounts are designed to make life easier for the smallest Limited Companies. If you meet at least two of the three statutory requirements and are not excluded under the Companies Act 2006, the regime can offer a simpler way to meet your filing obligations.

Just remember that simpler reporting does not remove your legal responsibilities. You still need accurate records and a complete Corporation Tax return for HMRC.

If your company comfortably qualifies, micro-entity accounts can be a practical choice. The key is making sure they are right for your business, not just convenient.

Not sure whether it’s right for you?

If you’re not quite sure whether your company qualifies, or you would rather not worry about thresholds and filing rules altogether, Crunch can help. Our qualified accountants and tax experts can confirm your eligibility, prepare compliance accounts and make sure everything is filed properly. So you can focus on your business, knowing your statutory obligations are taken care of.