Key takeaways
- The Financial Times reported on 21 October 2026 that accountants fear a £1.2 billion fee hit from a government plan to exempt mid-sized groups from audit.
- We could not find a published GOV.UK proposal or consultation setting out the plan, so treat the details as unconfirmed.
- Today a company is small, and can claim audit exemption, if it meets two of: turnover of £15 million or less, £7.5 million balance sheet or less, 50 employees or fewer.
- From April 2028 Companies House will require a strengthened eligibility statement from every company claiming an audit exemption.
- Budget 2026 counts up to £290 million a year of savings from a more proportionate company reporting framework.
Newspapers reported on 21 October 2026 that the government plans to exempt mid-sized company groups from audit, and that accountancy firms fear a £1.2 billion hit to fees. At the time of writing we could not find a government consultation or policy paper on GOV.UK that sets out the proposal. This page therefore separates what is confirmed from what is reported, and explains the audit rules that apply today.
What has been reported
The Financial Times reported on 21 October that accountants fear a £1.2 billion hit from a government plan to exempt mid-sized groups from audits. Other outlets, including Big4News and Traders Union, repeated the report in the following days. The reports describe fee income at mid-tier firms as the main exposure.
We could not confirm the details from a primary source. We do not know the thresholds, the types of company, the start date or whether this is a proposal, a consultation or a decision. Do not advise clients on the basis of the press reports alone. Look for a formal government publication and check its scope before acting.
What is confirmed
Several nearby measures are on the public record.
Budget 2026 counts company reporting savings. The Budget document lists up to £290 million a year of new gross administrative savings from “ongoing reforms to create a more proportionate company reporting framework”. It does not say what the reforms are. The savings are part of the government’s pledge to cut administrative burdens by 25%. See the 25% admin burden cut.
Companies House will tighten audit exemption claims. From April 2028, companies claiming an audit exemption must make a strengthened eligibility statement. Other changes in the same package are:
- a requirement to file the component parts of accounts and reports together
- a limit on how many times a company can shorten its accounting reference period
- software-only filing of accounts in iXBRL format
See Companies House pauses P&L filing for the full 2028 package.
The rules that apply today
A private company can claim audit exemption if it qualifies as small. Companies House gives these tests.
| Size | Qualifies if it meets any two of |
|---|---|
| Small | Turnover of £15 million or less, £7.5 million or less on the balance sheet, 50 employees or fewer |
| Micro-entity | Turnover of £1 million or less, £500,000 or less on the balance sheet, 10 employees or fewer |
Small companies can file abridged accounts that are not audited. Dormant companies that qualify as small also do not need an audit. A company must still send statutory accounts to its members and to HMRC, even if it uses the exemption at Companies House.
Companies above the small company tests do not qualify for that exemption today. Our guides to abridged vs full accounts and company accounts filing deadlines explain the options.
Why the topic matters
The press reports focused on fees at mid-tier firms. For clients, any change in who needs an audit would affect cost and timing, so it is worth following closely.
What advisers should do
- Do not change engagement letters yet. Wait for a formal proposal.
- List clients near the small company thresholds. They are the likeliest to be affected by any change to the tests.
- Check the audit exemption statements you sign. The eligibility statement becomes stricter in April 2028.
- Watch GOV.UK and the professional bodies. The ICAEW, ACCA and others will respond to any formal proposal.
Frequently asked questions
Is there a confirmed plan to exempt mid-sized companies from audit?
We could not find a government publication confirming one. The report comes from the Financial Times on 21 October 2026.
What are the audit exemption tests for small companies today?
A company is small if it meets any two of: turnover of £15 million or less, £7.5 million or less on its balance sheet, and 50 employees or fewer.
What changes for audit exemption claims in 2028?
From April 2028, Companies House requires a strengthened eligibility statement from all companies claiming an audit exemption.
Do I still need to prepare statutory accounts if I am exempt from audit?
Yes. Small companies and micro-entities must still send statutory accounts to their members and to HMRC with the Company Tax Return.
Sources
Rates, thresholds and rules in this guide were checked against HMRC and GOV.UK guidance on 1 November 2026. Tax rules change, so check the current position on GOV.UK or with a qualified adviser before acting. This guide is general information, not personal advice.