Tax Audit Thresholds and Requirements: What Changed in April 2025?
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If you’re confused by the tax audit thresholds in the UK, you’re not alone. The rules changed in April 2025, and many business owners are still unsure if they are affected.
The main takeaway is that fewer companies now need a statutory audit. That will come as a relief to many growing businesses. However, being audit-exempt does not remove the need to stay compliant or keep accurate records.
This guide explains what has changed, when an audit is still required, and what you should be aware of going forward.
What is meant by a tax audit?
When people refer to a tax audit, they are usually talking about a statutory audit. This is an independent review of a company’s accounts to confirm they have been prepared correctly and meet legal requirements.
This is different from an HMRC enquiry, a VAT inspection, or an IR35 review. Those checks can happen at any time, regardless of business size. A statutory audit, on the other hand, is only required when certain thresholds or conditions are met.
What is the UK statutory audit threshold?
For accounting periods starting on or after 6 April 2025, a limited company will usually only need a statutory audit if it meets two or more of the following thresholds:
- Turnover is more than £15 million
- Total assets are more than £7.5 million
- The average number of employees is more than 75
If your company stays below two of these limits, it will normally qualify as audit-exempt. For many businesses that were approaching the previous thresholds, this change removes an audit they may have expected to need.
Are there exceptions to the audit exemption?
Yes. Even if a company is below the audit threshold, an audit may still be required if:
- Your articles of association say an audit is needed
- Shareholders holding at least 10% of shares request an audit
- You operate in a regulated sector
- A lender or investor requires audited accounts as part of their terms
Because of this, turnover alone is not always enough to determine whether an audit applies.
What about sole traders and partnerships?
Sole traders and partnerships are not subject to statutory audit requirements in the same way as limited companies are.
However, HMRC can still review tax returns, request records, or open an enquiry if something appears incorrect.
Accurate, well-organised bookkeeping remains important, even without a formal audit requirement.
What happens if you do need an audit?
If an audit is required, the process itself is structured and predictable.
An auditor will typically:
- Review your accounting records
- Check that income and expenses have been recorded correctly
- Examine key balances to confirm the accounts give a true and fair view
- Confirm the relevant accounting standards have been followed
For businesses with up-to-date records, audits are usually manageable. Difficulties tend to arise when information is incomplete or pulled together late.
Audit-exempt does not mean risk-free
It is important to separate tax audit exemption from wider tax scrutiny.
Being below the audit threshold does not mean HMRC will not ask questions. Businesses and contractors can still face enquiries, VAT checks, or IR35 reviews.
In practice, unclear tax reporting and inconsistent records are more likely to attract attention than business size alone.
Contractors and audit thresholds
Most contractors operating through a limited company are nowhere near the level where a statutory audit becomes relevant.
For contractors, the focus is usually on accurate income reporting, sensible and well-supported expense claims, and a clear IR35 position.
HMRC enquiries are far more common than audits, and good records remain the strongest form of protection.
Growing businesses close to the threshold
Businesses operating just below the audit threshold often face the most uncertainty.
A one-off contract can temporarily increase turnover. Buying assets can increase balance sheet values. Hiring staff quickly can affect average employee numbers.
None of these are problems in themselves, but they can change your audit position sooner than expected.
Reviewing your figures ahead of your year-end gives you time to plan, rather than having to react after the fact.
Unsure whether an audit applies to you?
The April 2025 changes to the tax audit threshold mean fewer businesses will need a statutory audit.
They do not remove the need for clarity, good records, and early advice when circumstances change.
Understanding whether an audit applies, and what the requirements involve, makes it easier to focus on running your business without unnecessary concern. If anything is unclear, checking early is usually far simpler than trying to resolve issues later.
Contact us today to book your free, no-obligation consultation.
Author ProfileI'm the owner and Managing Director of Mollan & Co Accountants. I'm a skilled and efficient accountant with more than 20 years of experience in the industry.
I developed valuable skills in business and commercialisation through my work in the science and technology departments within the Scottish University sector. Then, in 2001, I formed my own internet-based marketing company, producing and distributing 360° virtual reality tours for the Scottish tourism sector.
I now use my commercial skills, expert tax knowledge and first-hand experience to help other businesses grow and flourish through strong accounting practice.
Our success at Mollan & Co is directly related to the success of our clients.
