One of the most common questions business owners ask is, “Do I need an audit?” The answer depends on a number of factors, but for most private limited companies, the starting point is whether the business exceeds the statutory audit thresholds.

Recent changes to UK legislation have increased these thresholds, meaning many businesses that previously required an audit may now qualify for exemption.

Current Audit Thresholds

For accounting periods beginning on or after 6 April 2025, a company will generally qualify for audit exemption if it meets at least two out of the following three criteria:

Criteria Current Threshold
Annual Turnover Not more than £15 million
Gross Assets Not more than £7.5 million
Average Number of Employees 50 or fewer

If your company exceeds two or more of these thresholds, a statutory audit may be required.

What Were the Previous Thresholds?

Prior to 6 April 2025, the audit exemption limits were significantly lower. For accounting periods beginning between 1 January 2016 and 5 April 2025, companies generally qualified for audit exemption if they met at least two of the following criteria:

Criteria Previous Threshold
Annual Turnover Not more than £10.2 million
Gross Assets (Balance Sheet Total) Not more than £5.1 million
Average Number of Employees 50 or fewer

It’s Not Always That Simple

Meeting the size criteria does not automatically mean an audit is not required. Certain companies are excluded from audit exemption, including:

  • Public companies
  • Insurance companies
  • Banking institutions
  • Certain regulated businesses

Group company rules can also affect whether an audit is required.

The Two-Year Rule

Audit requirements do not usually change immediately when a company crosses a threshold. In most cases, the legislation applies a “two consecutive years” test when moving into or out of audit exemption.  This prevents businesses from frequently switching audit status due to short-term fluctuations in performance.

Why Consider a Voluntary Audit?

Even where an audit is not legally required, some businesses choose to have one voluntarily. An independent audit can provide additional confidence to shareholders, lenders, investors and other stakeholders, particularly during periods of growth, acquisition activity or succession planning.

Cube Partners Tip

Many businesses assume audit requirements are determined solely by turnover. In reality, turnover, gross assets and employee numbers must all be considered, together with group structures and shareholder requirements. If your business is approaching the thresholds, it is worth reviewing your position early to avoid unexpected compliance obligations.