Company reporting rules could be simplified – new government proposals explained

The government has launched a wide-ranging consultation on simplifying the UK’s corporate reporting rules, with proposals that could reduce the amount of information many companies need to prepare and potentially allow more businesses to avoid a statutory audit.

The consultation opened on 7 September 2026 and runs until 30 November 2026. Importantly, these are currently proposals rather than changes to the law, but they indicate the direction in which company reporting requirements could move. GOV.UK

Read the government's consultation on modernising corporate reporting

Wider audit exemptions

One of the most significant proposals is to consider allowing some medium-sized companies to qualify for audit exemption.

At present, a company will generally need to qualify as small to benefit from the standard audit exemption. For accounting periods beginning on or after 6 April 2025, a company normally qualifies as small if it meets at least two of the following three conditions:

• turnover of no more than £15 million;

• a balance sheet total of no more than £7.5 million; and

• no more than 50 employees.

There are additional rules and exclusions, so meeting the size limits does not automatically mean every company can dispense with an audit. GOV.UK

The government has not yet set out a final new audit threshold. Instead, it is considering whether the existing exemption framework remains proportionate and whether certain medium-sized businesses could also be brought within it.

For growing owner-managed businesses, this could eventually be significant because a statutory audit can add considerably to both the cost and administrative work involved in the annual accounts process.

Less narrative reporting

The government is also looking at simplifying the narrative information that accompanies company accounts.

Plans already announced include removing the requirement to prepare a separate Directors’ Report, with some of the information currently included in that report either removed altogether or relocated elsewhere.

The government has also previously announced plans to exempt medium-sized private companies from preparing a Strategic Report and to extend the exemption in certain circumstances to wholly owned subsidiaries covered by their UK parent company's reporting. GOV.UK

The latest consultation goes further and considers whether the overall system of financial, non-financial, governance and remuneration reporting can be made simpler and more proportionate. GOV.UK

Changes to dividends could also be considered

Another potentially significant area is the law governing distributable profits and capital maintenance.

The current rules determine whether a company has sufficient distributable reserves to legally pay a dividend. The government is exploring whether the existing framework could eventually be replaced with a more straightforward solvency-based approach. GOV.UK

This is at an early stage and businesses should continue to apply the existing rules when declaring dividends. Directors must therefore still ensure that sufficient distributable reserves exist before a dividend is paid.

More digital reporting

The consultation also supports a move towards greater use of digital reporting and electronic communications.

This is consistent with the wider direction of Companies House reform, including the move towards software-based accounts filing.

These latest proposals are separate from the already announced Companies House accounts reforms due from April 2028, which include mandatory software filing and changes to the accounts that small companies and micro-entities will need to submit. GOV.UK

Nothing changes immediately

For now, companies should continue preparing their accounts and reports under the existing rules.

The consultation does, however, suggest that the government is looking seriously at reducing the compliance burden for private businesses, particularly those that have grown beyond the small-company thresholds.

We will know more once the consultation has closed and the government publishes its response. Any changes requiring legislation will then need to be formally introduced before they take effect.

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Please note that the above is for general information only and does not constitute financial or tax advice. You should not rely on this information to make or refrain from making any decisions. You should always obtain independent professional advice in respect of your own situation.