Companies House shake-up piles pressure on tiny businesses

Britain’s small companies are facing another wave of regulation after the government confirmed the biggest overhaul of company accounts in decades. Ministers say the changes will improve transparency and crack down on economic crime. Small business owners see something different: more paperwork, more costs, more software subscriptions and more time spent on compliance instead of running their businesses. At a time when firms are already grappling with higher taxes, rising employment costs and slowing growth, many are asking what happened to the promise of cutting red tape and whether anyone in government understands the reality of running a small business.

SMALL FIRMS TO BE HIT BY YET MORE NEW RULES

Photo by Walter L. B. on Unsplash

Small firms across the UK are wondering at what point there will be any let up in the new rules threatening to smother them. Yesterday the government confirmed a major shake‑up of company accounts. The new rules will force even the tiniest businesses to file more financial information with Companies House.

Whatever happened to the Government’s promise to cat the admin requirements on small firms by a quarter?

Ministers say the reforms, part of the Economic Crime and Corporate Transparency Act 2023, will “clean up the register”, modernise the system and help tackle fraud. But small business owners warn it will pile yet more pressure on firms already drowning in admin.

After months of wrangling, the government has now set out exactly how the changes will land and when.

The new rules affect ONLY companies registered with Companies House

These reforms apply exclusively to:

• Limited companies (Ltd)

• Limited liability partnerships (LLPs) where relevant filing rules apply

• Community Interest Companies (CICs)

• Companies limited by guarantee

• Micro‑entities and small companies that are incorporated

If a business is registered at Companies House, it is caught by the reforms regardless of size, turnover, or whether it trades actively.

The new rules don’t affect unincorporated small businesses:

• Sole traders

• Self‑employed individuals

• Freelancers

• Partnerships (unless they are LLPs)

• Unregistered micro‑businesses

• Informal or non‑incorporated community groups

These businesses do not file accounts with Companies House, so the new rules do not touch them.

More data, more detail, more digital

Under the new rules, every affected company, including small companies and micro‑entities, will have to:

• File full profit and loss accounts with Companies House

• Use commercial software to submit accounts: no more paper or web forms

• Stop using abridged accounts

• Prove they’re eligible if they claim an audit exemption

• File all parts of their accounts together, not in dribs and drabs

• Limit how often they shorten their accounting period

It’s the biggest overhaul of company reporting in decades and it hits the smallest firms hardest….again and at a time when there are so many other new burdens to cope with.

Small firms get an opt‑out (of sorts)

After fierce pushback from business groups, the government has offered one concession: small and micro companies can opt out of publishing their profit and loss accounts on the public register.

But there’s a catch. Companies House, HMRC and law enforcement will still see the numbers behind the scenes. And the government hasn’t yet explained how the opt‑out will work, who qualifies, or how firms can protect commercially sensitive information.

For many of the smallest firms, from local shops to freelancers, that uncertainty is a major worry.

Deadline delayed

The reforms were due to kick in from April 2027. After “listening to concerns”, ministers have pushed the start date back to April 2028.

That gives businesses 21 months to get ready but when running a small or micro business is so time consuming – so all consuming, that delay will pass in a flash.

Accountants are also warning that yet again, software changes, training, and new compliance checks will add cost as well as take up time firms simply don’t have.

Software‑only filing

From April 2028, every company will have to file accounts in iXBRL format using commercial software.

That means:

• No more free Companies House web filing for accounts

• No more paper submissions

• Every business must buy or subscribe to software, or pay an accountant who uses it

The government says this will improve data quality and make fraud harder. Small firms say it’s yet another cost at the worst possible time, on top of so many other additional costs. Again, it seems as if the changes are to benefit the Government and certainty not the smallest businesses.

It’s transparency vs burden

Ministers insist the reforms will:

• Improve trust in UK companies

• Help investors make better decisions

• Bring Britain in line with other countries

• Crack down on fraud and shell companies

Small firms are the losers in this fight and while they aren’t against transparency they argue:

• They’re already overloaded with reporting rules

• Publishing financial data could expose them to competitors

• Software‑only filing adds cost and complexity

• The reforms feel designed for big corporates, not micro‑businesses

Small business owners are just trying to keep the lights on and for many yet another set of reports and yet another type of software will see those light switching off for good.

What happens next

Companies House will email every company with details of the changes and guidance on what to do next. More information on the P&L opt‑out is expected later this year.

For now, one thing is clear: Britain’s smallest businesses are about to face the biggest reporting shake‑up in years and they’ll need every day of that extra year to get ready. Don’t put this off. You need to start preparing now.

The detail of the Reforms

Yesterday the government announced another layer of paperwork for small and micro businesses. The publication this time is on how accounts reforms measures set out in the Economic Crime and Corporate Transparency Act 2023 (ECCT Act 2023) will be implemented. This follows extensive engagement with stakeholders to consider their views around the impact some of the reforms might have on companies.

Under the ECCT Act 2023, the government will reform how companies report information and what information they report when filing their annual accounts with Companies House. The accounts reforms seek to:

• improve the transparency, accuracy and reliability of data on the companies register

• inform business decisions

• modernise practices in line with other countries

• tackle economic crime

After some consideration, the government will proceed with the accounts reforms, including the following:

• requiring small companies and micro entities to file profit and loss accounts with Companies House as other companies do, but with the option to opt out of publishing this information on the public register

• requiring all companies to file their annual accounts via commercial software;

• removing the option for companies to file abridged accounts

• a strengthened eligibility statement for all companies claiming an audit exemption

• requiring component parts of the filed accounts and reports to all be filed together

• reducing the number of times a company can shorten its accounting reference period

To give companies more time to prepare, this package of accounts reforms will now come into effect from April 2028, rather than April 2027. This means all companies will have one full accounting year, plus 9 months (21 months) to get ready.

We will be contacting all companies via their registered email address to tell them about these changes and signpost available guidance.

Balancing transparency with reducing business burden

Allowing small companies and micro-entities to opt out of publishing their filed profit and loss accounts addresses concerns from the business and investment community around the privacy and commercial risks for smaller companies of disclosing this information.

Details of how smaller companies can opt out of publication of profit and loss will be confirmed in due course.

Companies who wish to enjoy the benefits of publication, such as improved access to finance and enhanced transparency can still do so.

Where a company opts out of publishing its profit and loss accounts, Companies House, law enforcement and HMRC will still have access to help identify and tackle fraud, economic crime and tax evasion.

Software-only accounts filing

From April 2028, we will require all UK registered companies to file their accounts in Inline eXtensible Business Reporting Language (iXBRL) format by using commercial software.

This applies to companies who file their own accounts and those who use third party agents or accountants to file their annual accounts. From this date, our web and paper-based filing systems will be closed for accounts filings.

We are providing a list of software providers on GOV.UK to help companies find a suitable software package.

This will improve the quality of financial data for register users and provide more opportunities over time for companies’ accounts data to be aggregated, compared and analysed for use more widely.

Companies House web filing services will remain available and fully supported for non-accounts filings, including confirmation statements and updates to director details.