The Department for Business, Innovation, Science and Trade (DBIST) initiated a ‘modernising corporate reporting’ consultation on 7 September 2026, which closes on 30 November 2026.
Under the proposed overhauls, many medium-sized companies may be exempt from mandatory audits.
This consultation forms part of a wider Government pledge to cut administrative burdens on businesses by 25 per cent by 2029.
What is being proposed?
The Companies Act 2006 considers various company size categories to assess which reporting, audit and disclosure requirements apply.
For medium-sized businesses wanting to access exemptions currently exclusive to small companies, they must not exceed two of the following three thresholds:
- Turnover of £54 million
- Balance sheet total of £27 million
- Average of 250 employees
Under these exemptions, many businesses would no longer need to have an audit, provide cash flow statements or prepare consolidated accounts.
Elsewhere, the proposals from DBIST include:
- Introducing an SME accounting standard
- Allowing companies to calculate employee numbers on a full-time equivalent basis
- Removing strategic report requirements for most medium-sized private companies
- Simplifying financial reporting rules
Is it always smart to forgo an audit?
While the proposals mean audits may become optional for some SMEs, forgoing an audit isn’t always the smartest move.
An audit can often go one step further than simple compliance and financial reporting, providing insights and peace of mind that your numbers are accurate.
Lenders also often rely on audited accounts when deciding how much to lend and at which interest rate.
Likewise, when it comes to selling a business, buyers and investors often look at audited figures when conducting due diligence as they offer greater credibility.
For any businesses mulling the exemption, it is important to evaluate long-term plans and whether spending money on an audit could have benefits.
At the moment, these changes are part of an ongoing consultation and so may be subject to change in future. We will bring you further updates as they emerge.
Speak to an accountant to evaluate whether an audit may be beneficial to your business.
