Micro-Entity Accounts: A Plain-English Guide for UK Company Directors

What is a micro-entity?

A micro-entity is the smallest category of company under the Companies Act 2006. To qualify, your company must meet at least two of these three thresholds for the financial year:

• •Turnover: no more than £632,000
• •Balance sheet total: no more than £316,000
• •Employees: no more than 10 on average

Most sole-director companies, freelancer limited companies, and contractor companies qualify easily.

What accounting standard do micro-entities use?

Micro-entities file under FRS 105 (Financial Reporting Standard applicable to the Micro-entities Regime). This is the simplest UK accounting standard. It strips away most of the disclosure requirements that larger companies face. No cash flow statement. No directors' report (in most cases). No detailed notes beyond a few mandatory ones.

What goes in micro-entity accounts?

Your accounts need just three things:

1. Balance sheet — a snapshot of what your company owns (assets) and owes (liabilities) at the end of the accounting period. This includes fixed assets, current assets (cash, debtors), current liabilities (creditors), and shareholder equity.
2. Profit and loss account — your income minus expenses for the period. Under FRS 105, you only need to show turnover, cost of sales, gross profit, administrative expenses, and the resulting profit or loss.
3. Notes — a handful of mandatory notes, mainly confirming that you prepared the accounts under the micro-entity provisions and any guarantees or financial commitments the company has.

Where do you file?

Two places, for two different audiences:

• •Companies House — your annual accounts (balance sheet and notes only for micro-entities — you do not need to file the P&L publicly). These must be in iXBRL format using the FRS 105 taxonomy.
• •HMRC — your CT600 corporation tax return, which includes the full accounts (P&L and balance sheet) as an iXBRL attachment. HMRC gets the full picture; the public only sees the balance sheet on Companies House.

Key deadlines

• •Companies House: 9 months after the end of your accounting period
• •HMRC CT600: 12 months after the end of your accounting period
• •Corporation tax payment: 9 months and 1 day after the end of your accounting period

For most companies with a 31 March year end, that means accounts to Companies House by 31 December and CT600 to HMRC by 31 March the following year.

Common mistakes

• •Forgetting the balance sheet must balance. Total assets minus total liabilities must equal shareholders' equity (share capital plus retained earnings). If it doesn't, something is wrong.
• •Including directors' salary in the wrong place. If you pay yourself a salary, it goes in administrative expenses (or cost of sales if appropriate), not as a separate line item.
• •Missing the corporation tax payment deadline. The payment deadline (9 months + 1 day) is different from the filing deadline (12 months). Pay late and you will owe interest.
• •Using the wrong accounting standard. If you exceed the micro-entity thresholds, you must file under FRS 102 Section 1A instead of FRS 105. The requirements are more demanding.