What Are Micro Entity Accounts?

Written By : Kasra Dash
Time : 5 minutes

If you run a small business, you could be eligible for micro entity accounts. Filing micro-entity accounts saves many small businesses money and time. This article covers how a business can qualify as a micro-entity company, how micro-entity accounts are prepared, and where they are submitted to.

What are reduced micro-entity accounts?

Micro entity accounts are a type of accounting method that allows smaller companies to file smaller or reduced accounts. This, in turn, allows small businesses to file their own company tax return and accounts without the requirement for accounting knowledge. It’s an optional, smaller method of accounting; however, it has big benefits.

If your small business is eligible to file micro entity accounts, you can submit abridged accounts with a simpler balance sheet. It’s up to your discretion whether you’d like to supply a director’s report or a profit and loss account.

Who can file micro entity accounts?

There are some eligibility criteria that a business must meet to be granted micro entity status or a ‘very small company’ by the UK government’s standards. They are:

10 employees or less per year on average
Under £632,000 turnover
The balance sheet must reflect £316,000 or less

Businesses registered as limited liability partnerships, not-for-profit organisations, a public limited company, or financial institutions (banks, lenders) will not be eligible to file abridged accounts. If your company is a parent company with group accounts, you won’t be eligible to use micro provisions. If this sounds like you, you may still be eligible for filing small business accounts. Contact our team below for assistance.

How to prepare micro entity accounts

Preparing micro entity accounts is a lot more straightforward than preparing typical, more detailed accounts. One thing remains the same; you’ll need to submit and file your annual accounts each year. As a micro entity, you can submit the following:

A simplified balance sheet that contains a director sign-off and statement confirming the sheet has been prepared to comply with micro entity requirements.
You can also supply an optional profit and loss account, which can be abridged to start at gross profit other than annual turnover.
The majority of micro entities are exempt from audits. However, you can submit an optional auditor report.
Micro entities can submit an optional directors report, similar to abridged accounts.

Micro entity provisions are optional but give qualifying companies the opportunity to save time and money on their accounts. The alternative is to file accounts under the small companies’ regime.

What are ‘filleted’ accounts?

Filleted accounts mean filing an even simpler version of micro entity accounts. If you’re a micro entity that files filleted accounts, you are only required to provide a confirmation statement and a balance sheet with director footnotes. The statement must confirm the accounts have been prepared with micro entity provisions in mind. Companies choose to submit filleted accounts if they want to reduce their public record.

How to complete micro entity accounts

Companies House’s online filing service is the preferred way for small companies to complete their micro entity accounts. To do this, you’ll need your Government Gateway login credentials and the authentication code given by Companies House.

As a micro entity, you also have the added bonus of utilising the government’s Company Accounts and Tax Online (CATO) online service, which allows you to submit your micro entity accounts to HMRC and Companies House simultaneously. You’ll need your government gateway details and company authentication code to do this. You can get your company authentication code from Companies House.

It’s worth noting that if you can prepare micro entity accounts earlier, you can submit them by post.

Micro entity accounts software

While micro entity accounts are simpler to produce, and you can do so manually, hiring an experienced accountant can handle it for you. An accountant can help you ensure you file your accounts to comply with either micro entity provisions applicable or the small companies regime if you’d like to include information outside of what Micro Entity accounts provide.

You may also want to use accounting software to save time and ensure you complete all the relevant steps appropriately. You’ll also be preparing for the 2026 Making Tax Digital (MTD) legislation that’s coming into effect.

What are the benefits of filing micro entity accounts?

Filing micro entities’ accounts have quite a few benefits, but the three main advantages are as below:

Filing micro entity accounts is simpler, leaving less room for mistakes.
Micro entity accounts don’t take as much time as full accounts.
If you file micro entity accounts yourself, you can save money on accounting costs.

It’s worth being aware of the risks of filing micro entity accounts yourself. While simpler than full accounts, a few hoops need to be jumped through to get them right.

Are there any downsides?

Filing your accounts as a micro entity can hold you back from funding through venture capital companies and angel investors. Funders may be deterred by the fact there isn’t much public record of your companies.

FAQs

Should I file micro company accounts?

If you’re a small company with an average of 10 employees or less per year, have a turnover of under £632,000, and your balance sheet reflects under £316,000, you could be eligible to file micro entity accounts.

If you want to reduce the amount of information relating to your company on public record, and you’d like to reduce admin and accounting costs, you might want to file micro company accounts.

If you’d like to hear more and would like further information on how to prepare accounts as micro entities with Companies House, get in touch with our team today.

How do I prepare micro-entity accounts?

When preparing micro entity accounts, it’s important to include the following:

Abridge profit and loss account
Abridged balance sheet
Auditor’s report

Micro entities don’t need to include a director’s report in their accounts, and most micro entities are exempt from audits, so therefore no auditor’s report is required. Companies can also claim the Small Companies audit exemption. However, qualifying companies can still opt to prepare their accounts with the same regimes that larger companies must adhere to.

If you want to reduce the amount of company information that is released to the public, you can choose to fillet your accounts. If so, you will only be required to file a balance sheet with the respective footnotes. A statement must also be filed to confirm a profit and loss account has not been filed.

How do I file micro-entity accounts?

You can file micro entity accounts via the Companies House WebFiling service or the Company Accounts and Tax Online (CATO) service. The latter is a better option if you want to submit your accounts simultaneously with HM Revenue & Customs and Companies House.

Should I use an accountant to file micro company accounts?

Accountants are crucial to ensure your accounts are managed in accordance with the law. Micro entities must file accounts to Companies House and HMRC, which are FRS 105 Financial Reporting Standard applicable. To get this right, a chartered accountant is the best way forward. If you have a micro company and an investment property, it’s worth noting that investment properties won’t need to be revalued each year.

Why did the Government create the new micro-entity classification?

The UK government created the new micro-entity regime to ease the accounting burden for small companies, meaning they can be exempt from specific financial reporting requirements. As micro entities are owner-managed, they usually don’t need to communicate with management and shareholders.

What is the aim of the micro-entity regime?

The main aim of the micro entities regime is to help small companies save money and time by allowing them to submit simplified statutory accounts that require less accounting than abridged accounts. This will mean fewer accountancy services may be required.

How does a company qualify as a micro-entity?

In order to qualify as a micro entity with Companies House, businesses must qualify for at least two of the thresholds mentioned below:

Average of 10 employees or less – see Section 384A for more guidance on calculating the number of average employees.
Turnover under £632,000 – if the accounting period is less than a 12-month period, the threshold should be adjusted proportionately.
Balance sheet total under £316,000 – the total amount of fixed assets.

If you’re unsure if your limited company qualifies as a micro entity, chat with our team of accountants to confirm where you currently stand. You may also qualify to register as a ‘dormant’ company if you’ve had no significant transactions in the current financial year accounting period.

Our accountants can look at your company’s performance, gross profit, individual accounts, profit and loss accounts, current assets, investment undertakings, and other financial details to help you take the best course of action for your business.

Ready to file micro-entity accounts?

The team of chartered accountants at TaxBite can help you figure out if filing via the micro entities regime is right for you and ensure your micro-entity accounts are fully compliant with HMRC.

Get in touch

Author

Director

Speak with our accountants

Get a bespoke quote in less than 60 seconds.

Get a quote