SMEs face new Companies House reporting rules under 2028 reforms

Companies House has announced new changes to its rules around account filing for small businesses in the UK.

Under the Government’s reforms for the Economic Crime and Corporate Transparency Act 2023 (ECCT Act 2023), small limited companies and micro-entities will be required to file profit and loss accounts with Companies House, meaning this information will be available to the registrar, and in some cases, the public.

The measures are part of the UK Government’s aim to tackle economic crime, but some warn that this kind of financial disclosure could have unintended consequences for small businesses, potentially affecting how lenders, suppliers, and customers assess a company’s financial health.

What changes are being made to Companies House filing requirements?

The new filing rules set out by Companies House will introduce significant changes to how UK businesses prepare and submit their annual accounts from April 2028.

Most notably, small businesses and micro entities must file profit and loss accounts with Companies House as other companies do, but they have the option to opt out of publishing this information on the public register. All businesses must also file their annual accounts through an HMRC-approved accounting software.

Other reforms include removing the option for firms to file abridged accounts (a less detailed version of a company’s statutory financial statements), an improved eligibility statement for all companies claiming an audit exemption, and reducing the number of times a business can shorten its accounting reference period.

These changes, which were expected to come into effect in April 2027 but were paused last year, will now be pushed to April 2028 to give companies more time to prepare.

Blair McDougall, Parliamentary Under-Secretary of State in the Department for Business and Trade, said in a ministerial statement: “The accounts reforms seek to improve the transparency, accuracy and reliability of data on the companies register, to inform business decisions, modernise practices in line with other countries, and tackle economic crime.”

Could these new rules hinder SME growth?

While the Government says greater financial disclosure will improve trust in the UK business environment, some industry figures have warned that publishing more detailed financial information may lead stakeholders to make judgements based on a company’s short-term profitability rather than its long-term prospects.

Lisa Cleaver, COO at alternative financing company eCapital, says that these changes risk how suppliers, customers, and some lenders might view the business, particularly if heavy investments paint the picture of unhealthy profit margins.

“An SME might reinvest heavily in equipment, people or stock to fund its next phase of growth may not have pretty margins in a given year – and that can be a sign of strength, not weakness.” Cleaver comments.

McDougall stated that companies that choose to make their financial information publicly available will benefit from improved access to finance and greater transparency.

However, Cleaver points out that lots of business owners struggling to access traditional forms of lending are increasingly being pushed towards riskier sources of finance, such as short-term loans, and this can paint a negative picture if financial information is available publicly.

“For those already navigating rising costs and a tighter lending environment, that is an additional pressure many could do without,” she added. 

“What growing businesses need is an environment where they are judged on their potential and their trajectory, not profit and loss numbers in isolation.”

How can businesses prepare for the new rules?

While these reforms are still nearly two years away, businesses are being encouraged to start preparing now.

One of the biggest changes is the move to mandatory digital filing, meaning all companies will need to submit their accounts through commercial software in iXBRL format rather than using Companies House’s existing web or paper-based systems. 

Therefore, businesses should look into whether their current accounting software meets the new requirements and speak to their accountant or software provider about any upgrades that may be needed.

Small and micro businesses should also familiarise themselves with the new requirement to file profit and loss accounts with Companies House, even if they later choose to opt out of publishing that information on the public register. Companies that currently file abridged accounts will need to prepare for the removal of that option and ensure future reporting processes include additional disclosures.

For now, the delay in the rollout gives businesses some breathing room to prepare, but questions remain over how the changes could affect growing firms in practice.