October 22, 2026 - Micro Entity Accounts

How To Prepare Micro-entity Accounts? A Step by Step Guide

How to Prepare Micro Entity Accounts? Detailed Guide for UK Directors

Amelia / October 22, 2026

Last reviewed: 22 October 2026 If you run a very small business in the UK, you need to understand how to prepare micro entity accounts to stay compliant and avoid unnecessary stress. Most business owners assume that accounts are only required for larger companies. However, micro businesses must prepare annual figures accurately and submit them on time. This is where micro entity accounts preparation becomes important. Additionally, if you are preparing annual accounts for micro businesses, you need to follow certain rules. These include recording income and expenses, and filing with Companies House and HMRC. This article guides you on how to prepare micro entity accounts, what information you need, and how to approach the filing process. Not sure where to start? Our Micro Entity Accounts service handles everything for you, accurately and on time. What Is a Micro Entity? In the UK, a company qualifies as a micro entity if it meets at least two of the following three criteria. Its annual turnover must not exceed £1 million. Its balance sheet total must not be more than £500,000. It should not have more than 10 employees on average. So, if your company meets the above criteria, it can qualify as a micro-entity in 2026. What Are Micro-Entity Accounts UK? Before we discuss how to prepare micro entity accounts, let’s talk about what micro-entity accounts are. Micro-entity accounts are simplified statements, particularly designed for small businesses in the UK. If your company meets specific criteria for micro-entity accounts, then you can take advantage of reduced filing requirements and streamlined reporting of micro-entity accounts. If you are wondering whether your small business needs a payroll, read our guide on payroll for small businesses in the UK. Who Can Prepare Micro Entity Accounts? When preparing micro entity accounts, it is important to understand who can prepare them. Company directors themselves or an accountant can prepare micro-entity accounts. The Directors Company directors are legally responsible for preparing accounts and complying with the applicable accounting requirements. Typically, eligible companies using the micro-entities regime prepare their accounts under FRS 105. If you want to learn more about the company director’s responsibilities, read our blog on the Main Responsibilities of a Micro Entity Company Director. Accountants A qualified accountant can help prepare the accounts, support the filing process, and check compliance. An accountant who specialises in UK small company accounts is highly preferred, especially due to the complexity of the UK rules. What Do Micro-Entity Accounts Include? Micro-entity accounts must comply with the relevant statutory and accounting requirements. The main components include: Balance sheet Profit and loss account Notes to the accounts Director approval and signature How To Prepare Micro Entity Accounts? The process of micro entity accounts preparation involves the following steps: Step 1: Check Eligibility As mentioned above, confirm whether the company meets the micro entity accounts criteria. They must meet two out of the three above-mentioned requirements. Step 2: Prepare Your Financial Records Collect all the relevant documentation, including bank statements, invoices, and receipts. Also, record income, expenses, assets, and liabilities accurately. Account for fixed assets using the applicable FRS 105 rules, including depreciation and impairment where required. Step 3: Prepare Your Accounts Balance Sheet: It is the core document that shows assets, liabilities, and capital. It must include the required statements and be signed by a director. Profit and Loss (P&L): Shows the company’s income, expenses, and profit or loss. It must be prepared even if it is omitted from the current Companies House filing. Notes to the accounts: Include the disclosures required for the company’s circumstances under the applicable rules. Step 4: Get Director Approval And Sign Make sure the directors review and sign the balance sheet. A digital signature may also be used. Step 5: File With Companies House Check the current Companies House filing options and use the appropriate service or software. Submit accounts that meet the micro-entity filing requirements. A private company’s accounts are usually due within nine months of its accounting reference date, subject to exceptions. Step 6: File Corporation Tax Return (HMRC) This is separate from Companies House. File your CT600 (Corporation Tax Return) with HMRC. Pay Corporation Tax within 9 months and 1 day after the end of your accounting period. If you are struggling to prepare micro-entity accounts, let our experts take care of the entire process. Get your micro entity accounts prepared and filed now! Companies House vs HMRC: What Is the Difference? Now that you know how to prepare micro entity accounts, let’s distinguish between preparing accounts, filing accounts with Companies House, and submitting accounts to HMRC with the Company Tax Return. Keep in mind that filing accounts with Companies House and submitting a Company Tax Return to HMRC are separate obligations. Look at the table below for a quick comparison: Requirement Companies House HMRC Main purpose Meet company reporting obligations Report taxable profits and calculate Corporation Tax Information required Accounts in the format required for the company Company Tax Return, including the required accounts and tax computations Typical deadline 9 months after the financial year-end for a private limited company Company tax return due 12 months after the end of the accounting period. Corporation Tax payment Not paid through the account filing process Usually due 9 months and 1 day after the end of the accounting period for a company with a standard accounting period, subject to applicable rules. Remember that the deadlines can differ. Therefore, filing accounts with Companies House does not automatically complete the company’s HMRC obligations. Moreover, you should check whether your company has a different first-accounts deadline or any other circumstances that affect the filing timetable. For further information, see GOV.UK guidance on preparing annual accounts. Do I Still Need to File a Corporation Tax Return? Yes, a UK company may need to submit a Company Tax Return to HMRC even if it qualifies as a micro-entity and files simplified accounts with Companies House. The requirements depend on the company’s circumstances and Corporation Tax position. What

What is FRS 105 and How Does it Affect Micro Entities?

Last reviewed: 22 October 2026 FRS 105 is the Financial Reporting Standard for micro entities — the smallest UK limited companies. If your business meets at least two of three limits (turnover up to £1 million, balance sheet total up to £500,000, and 10 or fewer employees), FRS 105 lets you prepare genuinely simplified accounts: a basic balance sheet, a profit and loss account, and a handful of minimum notes. No directors’ report, no cash flow statement, no audit. In this guide we explain exactly what FRS 105 is, who qualifies, what you must prepare and file, and the mistakes to avoid — with all figures checked against current Companies House and HMRC rules. Key takeaways FRS 105 is the UK accounting standard for micro entities, issued by the Financial Reporting Council. You qualify by meeting 2 of 3 limits for two consecutive years: £1m turnover, £500k balance sheet total, 10 or fewer employees (limits raised for periods starting on or after 6 April 2025). Under FRS 105 you prepare a simplified balance sheet, profit and loss account and minimum notes only — no directors’ report, no cash flow statement, no audit. At Companies House you can still keep your profit and loss account private — the planned April 2027 P&L disclosure requirement has been paused and is under review. You still file a full CT600 Corporation Tax return with HMRC, including your complete accounts. Check whether your company qualifies as a micro entity before choosing the regime. What is FRS 105? FRS 105 stands for Financial Reporting Standard 105 — the official UK accounting standard for micro entities, issued by the Financial Reporting Council (FRC) and effective for accounting periods beginning on or after 1 January 2016. It is a stripped-back version of FRS 102, the standard used by larger companies. Complicated treatments like deferred tax, fair value measurements and financial instrument disclosures are simply removed. Assets are recorded at historical cost (less depreciation), and the notes to your accounts are limited to a short statutory minimum. The logic is simple: if you’re running a one-person consultancy, a side hustle or a small family company, you don’t have investors demanding detailed reports — so the accounting rules shouldn’t pretend you do. Who qualifies as a micro entity? To use FRS 105, your company must qualify as a micro entity under the Companies Act 2006 by meeting at least two of these three conditions: Annual turnover of £1 million or less — your total revenue for the year. The limit is pro-rated if your accounting period is shorter or longer than 12 months. Balance sheet total of £500,000 or less — the total of your fixed and current assets (not assets minus liabilities) at the year end. 10 or fewer employees on average over the financial year. Two consecutive years. After your first financial year, you must meet the conditions in two consecutive years to qualify — and you only lose micro-entity status after exceeding the limits for two consecutive years. In your very first year, that single year is all that counts. These thresholds were increased for accounting periods beginning on or after 6 April 2025 (previously £632,000 turnover and £316,000 assets), so more businesses than ever now fall inside the regime. Who can’t use FRS 105? Even if you’re tiny, the micro-entity provisions don’t apply if your company is, at any time in the year: A public limited company (PLC) A credit institution, insurance undertaking, investment undertaking or financial holding company Excluded from the small companies regime (for example, an FCA-authorised firm) A charity A parent company preparing group accounts, or a company whose accounts are included in consolidated group accounts If any of these apply, you’ll need FRS 102 instead — even if you meet the size limits. See our detailed guide on who qualifies as a micro entity. Is FRS 105 mandatory or optional? FRS 105 is the standard written specifically for micro entities — if you prepare micro-entity accounts, FRS 105 is what you follow. But choosing the micro-entity regime itself is optional. If you qualify, you have two routes: Micro-entity accounts under FRS 105 — the simplest option: basic balance sheet, profit and loss account and minimum notes. Small company accounts under FRS 102 Section 1A — more detail and more accounting options (such as asset revaluations). Worth considering if you need richer accounts for lenders or investors, or you’re growing fast and will soon leave the micro limits behind. Most businesses that qualify choose FRS 105 because it’s the easiest and cheapest path to compliance. Compare the two regimes in our micro entity vs small company accounts guide. What goes into FRS 105 accounts? Here’s what you must prepare: Balance sheet — your assets, liabilities and equity at the year end, in a simplified format. It must carry a statement confirming the accounts were prepared under the micro-entity provisions — easy to forget, so check before filing. Profit and loss account — a summary of income and expenses for the year. Minimum notes — only the statutory essentials, such as the average number of employees and details of any directors’ advances, credits or guarantees. And what you don’t need: No directors’ report No cash flow statement No statement of changes in equity No deferred tax calculations or fair value measurements No extensive accounting policy disclosures For the practical filing steps, see how to file micro entity accounts. What you file at Companies House — and what you can keep private When filing at Companies House, a micro entity only needs to file its balance sheet and notes. You don’t file the profit and loss account publicly, which means your profit figures stay off the public record — a genuine privacy advantage for small businesses. Update: the government’s plan to force small companies and micro entities to publish profit and loss accounts (originally slated for April 2027 under the Economic Crime and Corporate Transparency Act 2023) has been paused and put under review.