FRS 102 Section 1A: Small Entity Accounts, Disclosures, and Filing

Under FRS 102 Section 1A, a small entity in the UK or Republic of Ireland prepares a balance sheet, a profit and loss account, and notes, using a reduced set of disclosures compared with full FRS 102. To use the regime, the company must meet the small companies size tests in the Companies Act 2006, not fall into an excluded category, and still produce accounts that give a true and fair view. The small entity reporting requirements in FRS 102 Section 1A cover which figures appear on the face of the accounts, which disclosures go in the notes, and what can be left off the public filing at Companies House.

Who Qualifies as a Small Entity

Small company status is set by sections 382 to 384 of the Companies Act 2006. For financial years starting on or after 6 April 2025, a company qualifies by meeting at least two of the following three tests:

Turnover of no more than £15 million (pro-rated if the financial year is not 12 months)
Balance sheet total of no more than £7.5 million (the aggregate of all assets shown on the balance sheet)
A monthly average of no more than 50 employees under contracts of service during the year

The turnover and balance sheet thresholds rose sharply in April 2025 from £10.2 million and £5.1 million. The employee ceiling stayed at 50, and many companies that were previously too large are now inside the regime.¹

The Two-Year Rule

A new company qualifies in its first financial year if it meets at least two of the three tests. After that, a rolling two-year test applies. Breaching the thresholds in a single year does not change your status; you lose small company status only if the breach repeats in two consecutive years, and even then the change takes effect in the second year.²

Groups

If the company sits in a group, the group as a whole must also qualify. Group thresholds are £15 million net (£18 million gross) turnover, £7.5 million net (£9 million gross) balance sheet total, and no more than 50 employees, applied on an aggregate basis with the same two-year rolling test. A company that would qualify on its own but belongs to a group that exceeds the thresholds cannot use Section 1A.²

Companies That Cannot Use the Regime

Some companies are excluded from the small companies regime whatever their size. If the company was any of the following at any point in the financial year, Section 1A is not available:

Public companies, including PLCs that are not listed
Authorised insurance companies
Banking companies
E-money issuers
MiFID investment firms
UCITS management companies

A subsidiary of an ineligible group is also generally excluded from the regime.³

The Accounts You Must Prepare

A small entity’s statutory accounts under Section 1A consist of three components: a balance sheet (statement of financial position), a profit and loss account, and notes to the financial statements.⁴

A statement of cash flows is not required, which is one of the more significant differences from full FRS 102. A statement of total comprehensive income and a statement of changes in equity are encouraged where they help give a true and fair view, but not mandated.

The true and fair view requirement overrides the reduced disclosure list. Directors are responsible for making sure the accounts reflect the economic reality of the business, and if the minimum disclosures leave something material unexplained, they must add whatever is needed. Treating the reduced requirements as a ceiling rather than a floor is a common mistake.

What the Notes Must Disclose

The notes carry most of the reduced disclosure work. Read alongside the Companies Act 2006, Section 1A requires the following at a minimum:

Accounting policies, including how assets are valued, revenue is recognised, and fixed assets are depreciated
The average monthly number of employees during the year
Financial commitments, guarantees, and contingencies not on the balance sheet, such as long-term lease obligations, bank guarantees, and pending legal claims
The nature and business purpose of any off-balance-sheet arrangements
Related party transactions

Post-balance-sheet events must also be addressed. Adjusting events, which provide evidence of conditions that existed at the year end, change the figures in the accounts. Non-adjusting events, which reflect conditions arising after the year end, are disclosed by nature and estimated financial impact but do not change the figures. The notes should record the date the accounts were authorised for issue and who authorised them.

Related Party Rules Tightening in 2026

For accounting periods beginning on or after 1 January 2026, UK small entities must apply paragraphs 33.9 and 33.14 of the revised FRS 102. That means disclosing the nature of the related party relationship, a description of the transactions, and the amounts involved. Paragraph 33.7, on key management personnel compensation, does not apply to small entities, so directors’ salaries and benefits do not automatically need to appear. If directors’ transactions are not on normal market terms, however, the Companies Act still requires them to be disclosed, and the true and fair override can push the disclosure further than the minimum in specific cases.⁴

Encouraged Disclosures

Section 1A also lists disclosures that are recommended rather than required: a statement of compliance with the standard, information about material going concern uncertainties, dividends declared or paid during the year, and, on first-time adoption of FRS 102, an explanation of how the transition affected reported figures. Many preparers include these voluntarily because they answer questions that banks and creditors would otherwise raise.

Filleted Accounts and What Goes on the Public Register

Small companies can file a shortened version of the accounts with Companies House. You do not have to file the profit and loss account, and you do not have to file the directors’ report. Revenue and profit figures stay off the public register.²

If you use this concession, state on the balance sheet itself that the profit and loss account has not been filed. If there is an auditor’s report and you are not filing that either, the notes must give the auditor’s name, whether the report was qualified or unqualified, and the nature of any qualification.²

Filleting only affects what is public. Directors must still prepare and approve the full accounts. Shareholders are entitled to the full set, and HMRC receives the full set with the Corporation Tax return.

Audit Exemption

Most companies that qualify as small under the Section 1A thresholds also qualify for exemption from a statutory audit. For financial years beginning on or after 6 April 2025, a private limited company is exempt if it meets at least two of:

Turnover of no more than £15 million
Balance sheet total of no more than £7.5 million
50 or fewer employees on average

Shareholders holding at least 10% of the shares, by number or by value, can still force an audit by writing to the company’s registered office at least one month before the financial year ends. The excluded categories listed above (public companies, banks, insurance companies, e-money issuers, MiFID firms, and UCITS management companies) always need an audit regardless of size.³

Claiming the exemption requires a directors’ statement on the balance sheet confirming that the accounts were prepared under the small companies regime and that the company is entitled to the exemption. Claiming an exemption the company is not entitled to creates personal legal exposure for directors.

Filing Format and Deadlines

Accounts must be filed digitally in inline XBRL (iXBRL) format, which embeds machine-readable tags into the document. Most accounting software handles the tagging automatically.⁵

A private limited company has nine months from the financial year end to file accounts with Companies House.⁶ The Corporation Tax return goes to HMRC separately, within 12 months of the end of the accounting period. Different deadlines, different penalty regimes, and missing one does not excuse missing the other. The directors must sign the balance sheet, confirming that the accounts were prepared under the small companies regime, before the accounts are filed.

Late Filing Penalties

Companies House imposes automatic civil penalties as soon as accounts are overdue, with no grace period. For a private company:⁷

Up to 1 month late: £150
1 to 3 months late: £375
3 to 6 months late: £750
More than 6 months late: £1,500

If accounts are filed late in two consecutive financial years, the penalty doubles. A company more than six months late for the second year in a row faces £3,000 from Companies House alone.⁷

HMRC penalties for late Corporation Tax returns run on a separate track. From 1 April 2026, a late return triggers an initial penalty of £200, with a further £200 if the return is still outstanding after three months. Three consecutive late returns push the initial penalty to £1,000, plus £1,000 more after three months.⁸

The Micro-Entity Alternative

A company smaller than the Section 1A thresholds may also qualify for FRS 105, the micro-entities regime. The micro-entity thresholds are turnover of no more than £1 million, balance sheet total of no more than £500,000, and no more than 10 employees, with the same two-out-of-three and two-year rolling tests.

FRS 105 reduces the disclosures further but comes with real accounting restrictions. Micro-entities cannot use fair value accounting. Investment property must be measured at cost less depreciation or impairment. Financial instruments are held at cost less impairment or at amortised cost. For a business with investment property or complex financial instruments, this can understate the economic value of the company, which matters when talking to a bank or investor. Many companies that could use FRS 105 stay on Section 1A for that reason.

Changes Coming to Public Filing in 2027

The Economic Crime and Corporate Transparency Act 2023 will change what small companies must put on the public register. The changes are expected to apply to accounts filed after 1 April 2027:

The option to file abridged financial statements will be removed
All companies will be required to file a profit and loss account with Companies House
Small companies will be required to file a directors’ report
Companies claiming an audit exemption will need to include an enhanced directors’ statement on the balance sheet

None of this changes how accounts are prepared under Section 1A. The standard and its disclosure requirements are the same. What changes is how much of the accounts becomes public. If your business currently relies on filleted accounts to keep revenue and profit off the register, plan for a more transparent filing environment from 2027.

1
GOV.UK. Prepare Annual Accounts for a Private Limited Company
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GOV.UK. Life of a Company Part 1 Accounts
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GOV.UK. Audit Exemption for Private Limited Companies
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Financial Reporting Council. FRS 102 The Financial Reporting Standard Applicable in the UK and Republic of Ireland
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GOV.UK. XBRL Guide for UK Businesses
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GOV.UK. Accounts and Tax Returns for Private Limited Companies
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GOV.UK. Late Filing Penalties
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GOV.UK. Increases to Corporation Tax Late Filing Penalties