Micro Entity Accounts Explained: Who Qualifies? (2026)
Micro-entity accounts are the simplest, cheapest way most small UK companies can file with Companies House — yet many directors don’t realise they qualify, and end up paying for far more disclosure than the law actually requires. This guide from Filing Accounts UK explains exactly what micro-entity accounts are, who qualifies, and how they compare to small company accounts, using only verified facts based on the Companies Act 2006 and current Companies House thresholds.
At Filing Accounts, we prepare and file micro-entity accounts for UK small businesses as one of our core services — see our Micro & Small Company Accounts Filing service for fixed-fee pricing. Full official guidance is available at GOV.UK: Micro-entities.
What Is a Micro-Entity?
A micro-entity is the smallest company size classification recognised under the Companies Act 2006, sitting below “small” and “large” companies. It was introduced in 2013 specifically to reduce the paperwork burden on the UK’s very smallest businesses — typically sole-director companies, holding companies, and simple service or consultancy businesses. Qualifying as a micro-entity is purely a Companies House filing classification — it has no effect on how your Corporation Tax is calculated, your capital allowances, or any other tax position.
Micro-Entity Qualifying Thresholds
To qualify as a micro-entity, your company must meet at least two of the following three conditions, for accounting periods beginning on or after 6 April 2025:
| Criteria | Micro-Entity Threshold |
|---|---|
| Turnover | £1 million or less |
| Balance sheet total | £500,000 or less |
| Average employees | 10 or fewer |
You only need to meet two of the three — you don’t have to satisfy all of them. “Balance sheet total” means the total value of everything your company owns (cash, money owed by customers, equipment, stock), not your profit or turnover. The employee count is an average across the year, so a temporary spike in staff numbers during a busy period won’t automatically disqualify you.
Worked Example: Do You Qualify?
Example 1: A consultancy has turnover of £850,000, a balance sheet total of £120,000, and 4 employees. It meets 2 of 3 (balance sheet and employees comfortably clear, turnover just under £1m) — it qualifies as a micro-entity.
Example 2: A property-holding company has turnover of only £40,000 but owns a building worth £650,000, with 1 employee. It fails the balance sheet threshold but meets turnover and employees — since it only needs 2 of 3, it still qualifies as a micro-entity despite owning a valuable asset.
Example 3: A growing agency has turnover of £1.4 million, a balance sheet total of £600,000, and 15 employees. It fails all three thresholds — it does not qualify as a micro-entity, but is likely to still qualify under the more generous small company thresholds instead.
The “Two Years In, Two Years Out” Rule
For an established company, you generally need to meet the micro-entity thresholds for two consecutive financial years before you can start filing under the regime — and you retain micro-entity status for one further year even after exceeding the thresholds, before you’re required to move up to small company accounts. This buffer means a single unusually strong year of turnover won’t immediately change your filing obligations. Newly incorporated companies are the exception — a brand-new company can qualify as a micro-entity from its very first financial year if it meets the conditions then.
Who Is Excluded, Even If They Meet the Size Thresholds?
Certain company types cannot use the micro-entity regime regardless of size:
- Public limited companies (PLCs), unless dormant
- Parent or subsidiary companies within a group, unless the group as a whole still qualifies for the relevant exemptions
- Financial institutions and insurance companies
- Any company already excluded from the small companies regime under Section 384 of the Companies Act 2006
Most ordinary trading companies, consultancies, and service businesses fall outside these exclusions.
What Do Micro-Entity Accounts Actually Include?
Micro-entity accounts are prepared under FRS 105, the accounting standard designed specifically for the smallest companies, and are intentionally minimal:
- A simplified balance sheet — this is always publicly filed at Companies House
- Minimal notes — far fewer than small company accounts require
- No directors’ report is required, under Section 415 of the Companies Act 2006
- Micro-entities are automatically exempt from audit, subject to the usual independence conditions
The balance sheet must include a specific statement: “These accounts have been prepared in accordance with the micro-entity provisions.”
Important: HMRC Still Needs the Full Picture
Filing simplified micro-entity accounts at Companies House does not reduce what HMRC requires. A full profit and loss account and tax computations must still be submitted to HMRC as part of your Company Tax Return (CT600). These are two entirely separate filings with different requirements — the simplification only applies to what appears on the public record at Companies House, not to what HMRC receives.
Micro-Entity vs Small Company Accounts
Qualifying as a micro-entity automatically means you also qualify as a small company — micro-entity is simply a more restrictive sub-category within the small companies regime. Even if you qualify for micro-entity status, you’re not obliged to use it:
| Micro-Entity Accounts (FRS 105) | Small Company Accounts (FRS 102 Section 1A) | |
|---|---|---|
| Profit & loss visible to public? | No | No (can file “filleted” accounts) |
| Directors’ report required? | No | Generally not, for small companies |
| Notes required | Minimal | More detailed |
| Audit required? | No (exempt) | No (exempt, in most cases) |
| Best for | The very smallest, simplest companies | Slightly larger companies, or those wanting fuller disclosure for lenders/investors |
Some companies deliberately choose to prepare fuller small company accounts even when they qualify for the micro-entity regime — for example, to present a stronger financial picture to a bank or prospective investor, since micro-entity accounts disclose the least information of any filing option.
Micro-Entity Accounts at a Glance
| Item | Detail |
|---|---|
| Turnover threshold | £1 million or less |
| Balance sheet threshold | £500,000 or less |
| Employee threshold | 10 or fewer (average) |
| Thresholds needed | Any 2 of the 3 |
| Accounting standard | FRS 105 |
| Profit & loss public? | No |
| Directors’ report required? | No |
| Audit required? | No |
| New companies | Can qualify from year one |
Common Mistakes to Avoid
Assuming You Need to Meet All Three Thresholds
You only need to meet 2 of the 3 conditions — many directors wrongly rule themselves out because they exceed just one threshold.
Confusing Balance Sheet Total With Turnover
The balance sheet total is what your company owns, not what it earns — a company with valuable assets but modest turnover can still be caught out here.
Thinking Micro-Entity Status Reduces What HMRC Needs
HMRC still requires a full profit and loss account with your CT600, regardless of what’s simplified at Companies House.
Not Reassessing Status Every Year
Growth can move you out of the micro-entity regime — check your size classification against the current thresholds every year, not just once when the company was formed.
Frequently Asked Questions
What are the micro-entity thresholds in 2026?
Turnover of £1 million or less, a balance sheet total of £500,000 or less, and 10 or fewer employees — meeting any 2 of these 3 qualifies you.
Can a new company qualify as a micro-entity straight away?
Yes. Newly incorporated companies can qualify from their very first financial year, without needing two consecutive qualifying years.
Do micro-entity accounts show my profit publicly?
No. Only the balance sheet is filed publicly at Companies House — your profit and loss figures aren’t disclosed on the public record.
Do dormant companies count as micro-entities?
Dormant companies with no significant accounting transactions can typically file even simpler dormant accounts, rather than micro-entity or small company accounts.
Does micro-entity status affect my Corporation Tax?
No. It’s purely a Companies House filing classification and has no effect on how your Corporation Tax, capital allowances, or any other tax position is calculated.
Am I forced to file micro-entity accounts if I qualify?
No. You can always choose to prepare fuller small company accounts instead, even if you qualify for the micro-entity regime.
File Your Micro-Entity Accounts With Filing Accounts UK
Checking whether you genuinely qualify, and preparing accounts correctly under FRS 105, is easy to get wrong without support — incorrectly formatted micro-entity accounts are one of the more common reasons Companies House rejects a filing. At Filing Accounts, we prepare and file micro-entity and small company accounts for UK small businesses on a fixed fee basis, so you know exactly what you’ll pay before you commit.
You can also view our full range of services and transparent pricing on our pricing page, or get in touch if you’re not sure whether your company qualifies.
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