What is a micro-entity?
What are the micro-entity thresholds?
A company is a micro-entity if it meets at least two of the three conditions in section 384A of the Companies Act 2006. The limits were raised for financial years beginning on or after 6 April 2025 by SI 2024/1303.
| Condition | Years starting before 6 April 2025 | Years starting on or after 6 April 2025 |
|---|---|---|
| Turnover | £632,000 or less | £1 million or less |
| Balance sheet total | £316,000 or less | £500,000 or less |
| Average employees | 10 or less | 10 or less |
Two further rules matter. A change in size only takes effect if the company meets, or stops meeting, the conditions in two consecutive financial years. And some companies can never be micro-entities: charities, investment undertakings, financial holding undertakings, credit institutions, insurance undertakings, parent companies preparing group accounts and companies included in someone else's consolidated accounts (section 384B).
Where do you see it in real accounts?
Micro-entity accounts are recognisable by a short balance sheet and a statement that they were prepared under the micro-entity provisions. The balance sheet follows a fixed format: fixed assets, current assets, creditors due within one year, net current assets, total assets less current liabilities, creditors due after more than one year, provisions and capital and reserves. They are usually prepared under the FRS 105 accounting standard.
On the Companies House register the company's accounts category reads "Micro Entity". In iXBRL filings the figures use the same FRC taxonomy tags as larger companies, such as NetAssetsLiabilities and Creditors, but there are far fewer of them.
Worked example
Example (illustrative figures, not a real company), year starting 1 May 2025:
| Test | Company figure | Limit | Met? |
|---|---|---|---|
| Turnover | £1.2 million | £1 million | No |
| Balance sheet total (gross assets) | £310,000 | £500,000 | Yes |
| Average employees | 8 | 10 | Yes |
The company meets two of three conditions this year. Because size status only changes after two consecutive years, it is a micro-entity for this year if it was one last year, or if it also met the conditions last year. Note that "balance sheet total" means total assets before deducting any liabilities, not net assets.
What micro-entity accounts show and hide
The filed balance sheet shows the company's position at its year end, with the prior year alongside. What is usually missing:
- Turnover and profit, because micro-entities may file the balance sheet only.
- Most of the notes that larger companies include.
- A directors' report and, normally, an auditor's report.
This is why you often cannot find a small company's turnover. Companies House has announced that from 1 April 2028 micro-entities and small companies will have to file a profit and loss account, with an option not to publish it on the public register, and accounts will have to be filed in iXBRL through software.
Why it matters when checking a company
Micro-entity is the most common accounts type on the register. On 1 October 2026, 1,674,362 active companies (32.4%) had last filed micro-entity accounts, and only 1.5% of them were overdue, against 8.4% for full accounts (see the data). The category itself tells you the company is small; the balance sheet tells you whether it is solvent on paper. Compare net assets and net current assets across at least three years: search any company to see its accounts type and balance sheet history.
Common confusions
- Micro-entity is not a legal form. It is a size category for accounts; the company is still a private limited company.
- Employees means the average number, not the headcount on the last day.
- The 2025 limits apply by financial year start date, not filing date.
Sources
- Companies Act 2006, section 384A and section 384B
- SI 2024/1303, the Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024
- GOV.UK: Micro-entities, small and dormant companies
- GOV.UK: Companies House changes to accounts filing from April 2028
FAQ
What are the micro-entity thresholds from April 2025?
For financial years starting on or after 6 April 2025, a company is a micro-entity if it meets two of three conditions: turnover of £1 million or less, a balance sheet total of £500,000 or less, and an average of 10 employees or less. Before that date the money limits were £632,000 and £316,000. The employee limit did not change.
Do micro-entities have to publish their turnover?
Not at present. A micro-entity can file only its balance sheet with Companies House, so turnover and profit stay off the public record. Companies House has announced that from 1 April 2028 micro-entities must file a profit and loss account, but they will be able to opt out of having it published on the register.
Can a micro-entity have negative net assets?
Yes. Size is tested on turnover, gross assets and employees, not on net assets, so a micro-entity can report net liabilities. This is common in young companies funded by director's loans. Negative net assets are worth investigating, but they do not by themselves mean the company is insolvent.
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