If you run a very small limited company in the UK, there's a good chance you qualify to file micro entity accounts - the simplest, most stripped-back form of statutory accounts available. But "simple" doesn't mean "optional," and getting it wrong can cost you real money in penalties and compliance headaches.
This guide walks you through everything you need to know: what micro entity accounts actually are, who qualifies (including the 2025 threshold changes), what you must include, how to file, and the pitfalls that trip up even experienced directors.
Key Takeaways
Micro entity accounts are highly simplified statutory financial statements designed for very small companies. They are filed mainly as a short balance sheet with minimal notes at Companies House, with no profit and loss account or directors report on the public record under current rules.
For financial years starting on or after 1 April 2025, most private limited companies qualify as micro entities if they meet at least two of three size tests: annual turnover not exceeding £1,000,000, balance sheet total not exceeding £500,000, and no more than 10 employees.
Filing micro entity accounts reduces public disclosures significantly - but directors remain legally responsible for preparing full annual accounts for HMRC, including a complete profit and loss account and corporation tax computations.
From April 2027, planned legislative changes under the Economic Crime and Corporate Transparency Act will require micro entities to file a profit and loss account with Companies House, ending the current privacy advantage.
Dormant companies use different, even simpler dormant company accounts and may also be treated as dormant for corporation tax purposes if HMRC is notified - but dormancy for Companies House and HMRC are separate concepts.
What Are Micro Entities and Micro Entity Accounts?
Micro entities are the very smallest UK limited companies, sitting within their own reduced reporting regime under the Companies Act 2006. The micro entities regime was introduced in 2013 to reduce reporting burdens on businesses that are simply too small to justify the complexity of full company accounts.
In plain language, a micro entity is a private limited company that meets specific size criteria based on turnover, balance sheet total, and number of employees. If your company falls within those limits, you have the option to prepare micro entity accounts - simplified statutory accounts that you can file with Companies House instead of more detailed small company accounts.
These micro accounts form part of the public record but contain far less financial detail than standard small company or large company accounts. They are presumed to give a true and fair view of the company's financial position under the micro entity provisions.
The regime is implemented through sections 384A and 384B of the Companies Act 2006 and the financial reporting standard FRS 105 - the standard specifically applicable to the micro entities regime. FRS 105 applies to companies qualifying under the micro entities regime and governs how they recognise, measure, and present their financial information.
Micro Entity Qualification Criteria (Including 2025 Threshold Changes)
A company qualifies as a micro entity if it meets any two out of three size tests for two consecutive financial years. For new companies, meeting the criteria in just the first financial year is sufficient. A micro entity must meet two of three criteria to qualify.
For financial years starting on or after 1 April 2025, the thresholds are:
Turnover not more than £1,000,000 (pro-rated for periods shorter or longer than 12 months).
Balance sheet total (total assets) not more than £500,000 at the year end.
Average number of employees not more than 10 during the year.
These represent a significant increase from the older limits that applied to accounting periods beginning before that date. Under the previous rules, micro entities must have a turnover of £632,000 or less and a micro entity's balance sheet total must be £316,000 or less, with the same 10-employee cap. The thresholds for qualifying as a micro entity are based on the latest available data and policy decisions, and the 2025 increase is estimated to bring over 100,000 additional companies into the micro entity category.
For comparison, small companies can have a turnover up to £10.2 million - so the micro regime targets a much narrower band of very small companies.
If a company exceeds the micro thresholds for two consecutive years, it must move to the small companies regime and can no longer file micro entity accounts. It would then need to prepare and file small company accounts under FRS 102 Section 1A.
Worked example: A consultancy with £450,000 turnover, £220,000 balance sheet total, and 4 employees clearly meets at least two of the three tests (turnover and employees), so it qualifies as a micro entity under the post-April 2025 rules. Companies must meet criteria in two consecutive financial years for micro entity status to continue - or just the first year for newly incorporated companies.
Companies That Cannot Use the Micro Entity Regime
Some companies are legally excluded from filing micro entity accounts, even if they fall within the size thresholds. Certain companies are excluded from claiming micro entity status, and certain companies cannot apply for micro entity exemptions regardless of their size.
The key excluded categories are:
Public limited companies (PLCs) and any company whose securities are traded on a regulated market.
Certain financial services, insurance and investment undertakings (e.g. banks, MiFID investment firms, UCITS funds).
Parent companies that prepare group accounts and certain subsidiaries within large groups.
Charitable companies that are required to follow separate charity accounting rules.
These companies must prepare and file accounts under the small, medium, or large company regimes using FRS 102 or full UK GAAP - not FRS 105. Small company accounts must comply with FRS 102 standards, and any company excluded from the micro regime must use the appropriate alternative framework.
Directors should check the detailed exclusions in sections 384A and 384B of the Companies Act 2006 or seek professional advice if there's any doubt about whether their company can file simplified accounts under the micro regime.
What Must Be Included in Micro Entity Accounts?
Although micro entity accounts are simplified, they are still statutory accounts and must meet specific content and format rules. Micro entity accounts must comply with FRS 105 standards, and companies must prepare accounts under FRS 105 when using this regime.
Micro entity accounts filed with Companies House typically include:
A simplified balance sheet that meets the FRS 105 layout requirements.
Very limited notes to the accounts, covering only core disclosures (e.g. guarantees, advances to directors, accounting policies where required).
Mandatory balance sheet statements confirming the use of micro entity provisions and entitlement to audit exemption.
No directors' report is required for micro entity accounts. Micro entities are exempt from filing a directors report under section 415(1A) of the Companies Act 2006.
Under current rules, micro entity accounts can be filed without a profit and loss account at Companies House. Micro entities do not need to prepare a profit and loss account for public filing purposes. However, a full profit and loss account is still needed internally for corporation tax computations and for company members. Companies must maintain proper detailed internal financial records regardless of what gets filed publicly.
Micro entities are generally exempt from statutory audits. They are exempt from audits under specific conditions set out in sections 477 and 476 of the Companies Act.
Micro entity accounts require minimal disclosure and no profit and loss account - but from April 2027, legislative changes under the ECCT Act are expected to require micro entities to file at least a basic profit and loss account at Companies House, increasing public transparency. Micro entities can also file abridged accounts under section 444 of the Companies Act and can submit filleted accounts to maintain privacy under the current framework.
Micro Entity Balance Sheet and Required Statements
The micro entity balance sheet is the core document filed with Companies House. It must follow one of the prescribed formats in FRS 105 and show a snapshot of the company's financial position at the year end.
The balance sheet must show:
Fixed assets (such as property, plant and equipment, and intangible assets).
Current assets (such as cash, stock, and trade debtors).
Creditors (amounts falling due within and after one year).
Capital and reserves (share capital and retained profits).
Micro entities can prepare simplified balance sheets with minimal notes. The simpler balance sheet format under FRS 105 reduces line items compared to a full set of individual accounts, but it must still capture the essential financial position.
Companies must include a statement on the balance sheet about micro entity provisions. The following statement (or wording to the same effect) must appear: "These accounts have been prepared in accordance with the micro-entity provisions of the Companies Act 2006."
The balance sheet must also set out statutory wording about audit exemption under sections 476 and 477, confirming that company members have not required an audit and that the directors acknowledge their responsibilities for keeping accounting records and preparing company accounts that claim exemption from audit.
At least one director must sign and date the simplified balance sheet, printing their name. This signed balance sheet is what gets placed on the public record at Companies House.
Notes to the Accounts and Disclosures
FRS 105 requires only minimal notes for micro entity accounts, significantly reducing the amount of financial detail on the public file. Micro entity accounts require less disclosure than small company accounts.
Typical mandatory note areas include:
Guarantees and other financial commitments not shown on the balance sheet.
Details of advances, credit, and guarantees to directors during the year.
Accounting policies where required to understand the balance sheet (e.g. depreciation of fixed assets).
Micro entities do not usually need to provide a detailed breakdown of debtors, creditors, fixed asset categories, or share capital movements in their filed accounts. There is no requirement for the kind of granular financial details that more detailed accounts under FRS 102 would demand.
Additional disclosures can be voluntarily included if directors wish to present a fuller picture to lenders or stakeholders. Under planned reforms from April 2027, more standardised note disclosures may be required alongside the profit and loss account.
Micro Entity Accounts vs Small Company Accounts and Abridged Accounts
Micro entity accounts sit within the small companies regime but offer even lighter reporting than standard small company accounts. Here's how they compare:
Feature | Micro Entity Accounts (FRS 105) | Small Company Accounts (FRS 102 s1A) |
|---|---|---|
Accounting standard | FRS 105 | FRS 102 Section 1A |
Directors report | Not required | Usually required |
Profit and loss account (public) | Not currently filed | May be filed (filleted option available) |
Notes to accounts | Minimal (3–4 areas) | More extensive |
Audit | Generally exempt | Exempt if within small thresholds |
Balance sheet detail | Simplified | More detailed breakdown |
Micro entities apply FRS 105, with very limited notes and no directors report.
Small companies apply FRS 102 Section 1A, requiring more disclosures and usually a directors report.
Historically, both could file abridged accounts to Companies House, but this option is being removed under the Economic Crime and Corporate Transparency (ECCT) Act.
Qualifying companies can choose not to use the micro regime. Directors may instead prepare and file small company accounts - for example, to provide lenders with more detailed accounts or to show the company's performance more transparently.
Abridged or filleted accounts have allowed private companies to omit the profit and loss account from public filing, but from 1 April 2027, UK small and micro companies will need to file more complete annual accounts, including profit figures. The ability to file abridged accounts will be removed entirely.
Directors should weigh the benefits of reduced disclosure against potential downsides, such as weaker information for investors or banks who may rely on public accounts when making lending decisions.
Dormant Companies and Micro Entities
Many very small companies are dormant - not trading - and these have their own simplified filing route separate from micro entity accounts.
A dormant company, for Companies House purposes, is one that has had no significant transactions during the financial year, excluding certain permitted items such as share capital issued on incorporation and filing fees for the annual confirmation statement. These companies do not have significant accounting transactions that would require them to prepare full entity accounts.
A dormant micro entity can usually file dormant company accounts instead of micro entity or small company accounts, using Companies House online services or forms such as AA02 for certain private companies limited by shares that have never traded.
Dormant companies meeting the small or micro thresholds are usually exempt from audit, provided they have been dormant since incorporation or since the previous financial year. However, filing dormant accounts does not remove the requirement to submit an annual confirmation statement at Companies House and keep the company's statutory registers up to date.
Being dormant for Companies House does not automatically mean the company is dormant for Corporation Tax. Directors must notify HMRC separately.
Dormant Status and HMRC Requirements
Companies House and HMRC apply different concepts of dormancy, and both need to be considered by directors.
A micro entity may be dormant for corporation tax purposes where it has:
No trading activity.
No taxable income such as interest, rent, or chargeable gains.
Once HMRC accepts a company as dormant, it will usually stop requesting annual accounts and company tax return (CT600) filings until trading resumes or other taxable income arises.
Directors should always respond to HMRC notices. If HMRC has already issued a notice to deliver a corporation tax return, the company must file a company tax return even if it is now dormant - failure to do so will result in penalties regardless of dormant status.
Becoming dormant does not remove the obligation to file an annual confirmation statement at Companies House, keep accounting records up to date, and maintain the company's statutory registers.
How to Prepare and File Micro Entity Accounts
The process of preparing and submitting micro entity accounts follows a logical sequence: keep accounting records throughout the year, prepare annual accounts under FRS 105 at year end, and file those accounts with both Companies House and HMRC.
Directors are legally responsible for:
Maintaining accurate accounting records throughout the year.
Preparing annual accounts for each financial year.
Ensuring that the filed micro entity accounts give a true and fair view under the micro entity provisions.
Although micro entities can file simplified accounts, the underlying bookkeeping, tax calculations, and compliance still require care. Many directors benefit from using accounting software or a professional accountant, especially when dealing with accounts money, payroll, or VAT.
Micro entity accounts can be filed:
Electronically using Companies House WebFiling or other approved software that outputs iXBRL format.
In paper form by post, although this is slower and increases the risk of missing deadlines.
A typical year end accounts workflow:
Close the books for the specific accounting period.
Check whether the balance sheet total, turnover, and employee count still meet micro thresholds.
Produce the FRS 105 balance sheet with required statements.
Have a director sign and date the balance sheet.
Submit the accounts with Companies House electronically.
Prepare the full profit and loss account and tax computations for HMRC and file as part of the company tax return.
Filing Deadlines and Late Filing Penalties
Missing your filing deadline triggers automatic companies house penalties - there's no grace period, no warning letter, and no excuse-based appeals process for simple lateness.
Key deadlines for private companies:
First accounts: normally due 21 months after incorporation. Accounts must be filed within 21 months of incorporation. For example, a company incorporated on 10 June 2025 with a 30 June year end must file first accounts by 10 March 2027.
Subsequent accounts: due 9 months after the accounting reference date (ARD). For example, if the ARD is 31 March 2026, the filing deadline is 31 December 2026.
Corporation tax accounts and the CT600 company tax return are due to HMRC within 12 months of the end of the corporation tax accounting period, which usually matches the financial year.
Late filing penalties at Companies House escalate based on how late the accounts are:
Delay | Penalty (Private Company) |
|---|---|
Up to 1 month | £150 |
1–3 months | £375 |
3–6 months | £750 |
More than 6 months | £1,500 |
The penalty doubles if accounts are late in two consecutive years. That means a company that files more than 6 months late two years running faces a £3,000 penalty in the second year alone.
Diarise your deadlines well in advance and file early. Relying on last-minute postal delivery is a recipe for unnecessary penalties.
Where and How to Submit Micro Entity Accounts
Active micro entities must file annual accounts in two places:
To Companies House (statutory accounts on the public record).
To HMRC, as part of the company tax return, usually in iXBRL format via approved software.
Dormant micro entities typically only file dormant accounts with Companies House. They do not file with HMRC if HMRC has confirmed dormant status and has not issued a notice to deliver a return.
Here's how online filing works in practice:
Prepare the FRS 105 accounts in accounting software or via an accountant.
Generate iXBRL-tagged files containing the balance sheet and any required notes.
Log into Companies House WebFiling or compatible software, upload the accounts, and submit.
Receive an electronic acknowledgement once accounts with Companies House have been accepted.
For HMRC, accounts and computations must generally be sent electronically together with the CT600, using commercial software that handles iXBRL tagging automatically. The accounts submitted to HMRC will include the full profit and loss account and detailed tax computations - far more than what Companies House receives.
Avoid last-minute paper submissions. They rely on postal delivery times and manual processing at Companies House, which can easily lead to unexpected late filing penalties.
Common Micro Entity Accounting Pitfalls
The micro regime is designed to be simple, but misunderstandings frequently lead to compliance problems and penalties. Here are the issues that catch directors out most often:
Assuming that being "micro" or having low turnover means no need to file company accounts at all. Every active limited company must file accounts - no exceptions.
Confusing the limited information filed at Companies House with the more detailed accounts and tax computations required by HMRC. Your corporation tax return needs a full profit and loss account even though Companies House doesn't.
Failing to monitor whether the company still meets micro entity thresholds as it grows, leading to incorrect filing under FRS 105 when the company should have moved to the small companies regime.
Poor or incomplete bookkeeping, making it hard to produce an accurate balance sheet total and profit figure at year end.
Directors sometimes forget to notify HMRC when trading stops, so the company continues to receive tax return notices and can be fined for non-submission of a corporation tax return.
Preventive measures that actually work:
Use cloud-based accounting software to keep real-time records throughout the year.
Set calendar reminders several months before Companies House and HMRC deadlines.
Review thresholds at each year end to confirm whether micro entity status still applies.
If your company has unusual transactions - investment properties, intercompany loans, or complex share structures - seek professional advice. These situations may not fit easily into the basic FRS 105 framework, and getting it wrong can mean restating accounts later.
FAQ
Can I choose not to use micro entity provisions even if I qualify?
Qualifying companies are not forced to adopt the micro entities regime. Directors can instead choose to prepare small company accounts under FRS 102 Section 1A or even full accounts if they prefer. Some companies voluntarily file more detailed accounts to present stronger financial information to banks, investors, or suppliers who rely on accounts on the public record. The decision should balance administrative savings against commercial needs - if your lender wants to see your company's performance in detail, simpler accounts may actually work against you.
Do micro entity accounts automatically satisfy HMRC requirements?
No. Micro entity accounts filed at Companies House are separate from the accounts and computations submitted to HMRC with the company tax return. HMRC normally expects a full profit and loss account, balance sheet, and detailed tax computations, even where Companies House only receives a short balance sheet and minimal notes. Use HMRC-recognised accounting software or an accountant to ensure the HMRC submission is complete and in the correct iXBRL format. The simplified accounts you send to Companies House will not satisfy your corporation tax obligations on their own.
Are micro entity accounts suitable for property and investment companies?
Many small property investment and buy-to-let companies do qualify as micro entities by size and can use FRS 105. However, FRS 105 requires investment properties to be held at historical cost rather than fair value, which can significantly change the reported figures compared to small company accounts under FRS 102. If up-to-date property valuations matter to your stakeholders or lenders, the limitations of FRS 105 may outweigh the benefit of reduced disclosure. Consider whether filing more detailed accounts under FRS 102 better serves your business.
What happens if my company stops qualifying as a micro entity?
If a company exceeds the micro thresholds for two consecutive financial years, it loses micro entity status and must move to the appropriate reporting regime - usually the small companies regime under FRS 102 Section 1A. From the first year after losing status, accounts must include more extensive notes and possibly a directors report. If growth is expected, plan ahead: make sure your bookkeeping and systems already collect the extra information needed to file small company accounts without scrambling at year end.
Will my turnover and profit remain private after 1 April 2027?
Current government plans under the ECCT Act mean that, from April 2027, micro entities and small companies will need to file a profit and loss account with Companies House. This will make key figures such as turnover and profit figures publicly visible for financial years starting on or after that date. However, as of mid-2026, the government has delayed the original April 2027 start date, with current expectations pointing to 2028 implementation. Directors should factor these upcoming changes into long-term planning, particularly if they have relied on minimal public disclosure as a strategic benefit. The ability to file abridged accounts will also be removed under the same reforms.
