How to file micro entity accounts – a guide for small businesses

For the smallest companies, filing micro entity accounts is optional. If you want to, you can still file full accounts in the same way as larger companies.

However, a benefit of choosing to file basic micro entity accounts is that you can submit an abridged version with a simplified balance sheet. Supplying a profit and loss account or director’s report is also up to you, while it’s likely you’ll be exempt from auditing.

Who can file micro entity accounts?

The government describes a micro entity as a ‘very small company’. You’ll be considered a micro entity if you meet two of these three criteria:

• turnover of £632,000 or less
• £316,000 or less on your balance sheet
• an average of 10 employees or less over the course of the year

Even if you meet the above micro entity accounts criteria, you won’t be able to file abridged accounts if your business is any of the following:

• not-for-profit organisation
• limited liability partnership
• public limited company
• financial institution like a lender or bank

If you don’t qualify as a micro entity, you may still be able to file accounts as a small company. Read our guide on how to file company accounts to find out more about what you need to do and the deadlines you need to meet.

How to prepare micro entity accounts

It’s a legal requirement to file your company accounts each year and it can be a daunting process. If you qualify as a micro entity, here’s an overview of what you can submit:

• a simplified balance sheet – this won’t need to include information on creditors and debtors. However, it’ll need footnotes and signing off by a director. You’ll also need to include a statement to confirm it's been prepared in line with micro entity provisions
• a simplified profit and loss account – this is optional. However, if you do choose to send it, it can be abridged, starting from gross profit instead of turnover
• an auditor’s report – most micro entities are exempt from auditing, but you can submit this report if you want to
• a director’s report – this is also optional if you submit micro entity or abridged accounts

What are ‘filleted’ accounts?

You can also choose to ‘fillet’ your accounts, which is when you submit an even simpler version. Micro entities that file filleted accounts only have to supply a balance sheet with footnotes and a statement confirming that a profit and loss account hasn’t been submitted.

Filleting accounts reduces the amount of information on public record about your company.

How to complete micro entity accounts

Most micro entities choose to use Companies House’s online filing service. You’ll need your Government Gateway login and Companies House authentication code.

Micro entities also have the benefit of being able to use the Company Accounts and Tax Online (CATO) service, which allows you to submit your accounts to HMRC and Companies House at the same time.

You can file micro entity accounts by post, but you’ll need to prepare them earlier as postal submissions take longer to process.

Micro entity accounts software

While you can complete your accounts manually, you might want to hire an accountant to do it for you.

You can also use accounting software to help you fill out and format all the necessary information. Good accounting software can save you time and make sure that you’re submitting exactly what you need to.

Our guide to the best accounting software for small businesses compares the best-known suppliers and explains more about cloud accounting software.

What are the benefits of filing micro entity accounts?

If you’re eligible to file micro entity accounts, there are three main advantages:

• it’s less time-consuming than filing full company accounts
• the process is simpler, so there’s less chance of getting things wrong
• the quick and simple nature of filing micro entity accounts could save you money as you may not need to hire an accountant

Are there any downsides?

On the flipside, if you’re looking for funding to grow your company, such as angel investment or venture capital, filing micro entity accounts could hold you back.

This is because there’ll be less publicly available information about your company, so investors may choose to fund companies they know more about.

Micro entity accounts template

A micro entity account template could give you a good idea of the information you need to submit and how it needs to be laid out.

However, remember to make sure the template you’re using is right for the size of your company. You also need to make sure that the accounts you submit meet either the International Financial Reporting Standards or the New UK Generally Accepted Accounting Practice.

Sage has some example micro entity accounts on its website.

Please use this article as a guide only. Before submitting your accounts, check the government guidance and get the help of a professional accountant if you need it.

Small business guides and resources

• A guide to filing your company tax return and paying corporation tax
• What's the difference between a sole trader and a limited company?
• How can small businesses get R&D tax relief?
• What does the National Insurance hike mean for small businesses?
• What does professional indemnity insurance cover?

Do you use an accountant to manage your accounts and tax return? Let us know in the comments below.

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Photograph 2: Moon Safari/stock.adobe.com