Government consults on major changes to company reporting and audit

The Government has launched a significant consultation on the future of UK corporate reporting, with proposals that could substantially change the accounts, audit and Companies House filing requirements applying to private companies.

Published on Monday (7 September 2026), Modernising Corporate Reporting to support long-term economic growth describes the reforms as a “once-in-a-generation” opportunity to simplify the UK's corporate reporting framework. The guiding principles include simplicity, proportionality and ensuring that reporting provides genuinely useful information to investors and creditors.

For many owner-managed businesses, two areas in particular are worth watching.

Could medium-sized companies become exempt from audit?

At present, qualifying small companies can generally claim exemption from statutory audit, whereas medium-sized companies ordinarily have to prepare and file audited accounts. The consultation records the current medium-sized thresholds as:

· turnover below £54 million;

· gross assets below £27 million; and

· fewer than 250 employees,

with two of the three criteria needing to be met and a one year period of grace.

The Government is now considering a much more significant change: effectively bringing small and medium-sized companies together within a broader SME reporting regime and potentially extending the existing small-company audit exemption to medium-sized companies.

The consultation recognises that audit provides valuable independent assurance and can assist businesses in obtaining finance. However, it questions whether those benefits justify requiring every medium-sized company to incur the cost of a statutory audit.

This proposal is developed further in Chapter 4. The Government suggests that statutory audit should be required where the risks to investors and creditors justify its cost, rather than simply because a company has crossed a size threshold. It therefore proposes extending the small-company exemption to all SMEs, alongside the possible creation of a lower-cost voluntary assurance standard designed to give lenders confidence in SME accounts.

That would be a significant change. For a substantial privately owned company with a small number of shareholders, limited external borrowing and relatively straightforward financial affairs, the annual statutory audit can represent a considerable cost. Giving directors and shareholders greater choice could therefore be welcome.

There is, however, an important counterpoint. Audited accounts can provide credibility with banks, investors, customers and suppliers. The consultation itself highlights the risk that a business could discover too late that a lender wants a track record of audited accounts. It

therefore asks specifically whether removing mandatory audit could reduce access to finance or increase borrowing costs.

In practice, therefore, audit exemption would not necessarily mean that audit becomes irrelevant. Some medium-sized companies might sensibly continue to obtain an audit voluntarily because of the commercial assurance it provides.

Changes are also coming to Companies House filing

At the same time as potentially reducing some reporting burdens, the direction of travel at Companies House is towards more structured and digitally accessible financial information.

The consultation confirms previously announced reforms under the Economic Crime and Corporate Transparency Act 2023 which are expected to take effect from April 2028. These include requiring all companies to file annual accounts using commercial software and requiring small companies and micro-entities to file profit and loss accounts, although there will be an option for that profit and loss information not to be published on the public register.

Interestingly, where a company is audited, the consultation goes further still: auditors could be required to report on whether the accounts have been correctly formatted and tagged in accordance with the applicable taxonomy.

This reinforces an important message for businesses - corporate reporting may become simpler in terms of what has to be reported, while becoming considerably more digital and structured in how that information is prepared and filed.

What does this mean for businesses?

These are currently consultation proposals rather than final rules, and the consultation runs until 30 November 2026.

Nevertheless, the direction of travel is interesting. The Government appears willing to question whether a medium-sized private business should automatically require a statutory audit simply because it exceeds the small-company thresholds. At the same time, Companies House is moving towards more comprehensive, software-driven and machine-readable financial reporting.

For growing businesses, that could make the decision about audit increasingly commercial rather than purely statutory - does an audit provide sufficient value to shareholders, lenders and other stakeholders to justify its cost?

At SWLA Accounting, we will be following the consultation and subsequent proposals closely. If you would like to discuss how the proposed changes could affect your company's accounts, audit requirements or Companies House filings, please get in touch.