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. Companies House has confirmed companies will get at least 21 months’ notice before any new filing requirements take effect. So for now, your P&L can stay private.

Full accounts — profit and loss included — still go to HMRC with your CT600 Corporation Tax return. Companies House and HMRC filings are separate obligations, and HMRC always sees the complete picture. See how to file micro entity accounts for the step-by-step process.

Do micro accounts need an audit or an accountant’s report?

No. Micro entities are exempt from the statutory audit, and no formal accountant’s report is required for filing. Your directors simply sign the balance sheet to confirm it’s correct.

That doesn’t mean professional help is pointless. Even simplified accounts must be accurate and compliant — and your Corporation Tax return still needs full, correct figures. Most owners find an accountant worthwhile for correct FRS 105 preparation, on-time filing, CT600 submission and tax planning.

FRS 105: benefits and limitations

Benefits:

• Simplified reporting — basic balance sheet and profit and loss, minimal notes, far less paperwork.
• Lower costs — simpler accounts take less time to prepare, which usually means lower accountancy fees.
• No audit — saves money and removes a major compliance burden.
• Privacy — you can keep your profit and loss account off the public record.
• Easier to understand — no technical jargon or pages of disclosures; you can actually read your own accounts.

Limitations:

• Lenders and investors may want more detail than FRS 105 provides.
• Some accounting treatments aren’t available — notably asset revaluations and fair value accounting.
• If you’re growing fast, you may outgrow the regime quickly and need to switch to FRS 102 Section 1A anyway.

FRS 105 deadlines and late-filing penalties

The standard stays simple — the deadlines don’t forgive:

• Companies House: accounts due 9 months after your accounting period ends (21 months for your first accounts).
• HMRC: CT600 due 12 months after your accounting period ends; Corporation Tax itself is payable 9 months and 1 day after.
• Companies House late-filing penalties start at £150 and rise to £375, £750 and £1,500 the later you file — doubled if you file late two years running.
• HMRC CT600 penalties are £100/£200 initially, rising to £500, £1,000 and £2,000 for repeated late filing — doubled from 1 April 2026 for late filing in three successive years.

Common mistakes to avoid with FRS 105

• Assuming you qualify — if you’re close to the £1m/£500k/10-employee limits, re-check every year, and remember the two-consecutive-year rule.
• Forgetting the micro-entity statement — every FRS 105 balance sheet must state it was prepared under the micro-entity provisions.
• Using banned accounting treatments — no fair value accounting, no asset revaluations; everything at historical cost.
• Poor record-keeping — simplified accounts still need proper bookkeeping behind them.
• Mixing up the deadlines — Companies House (9 months) and HMRC (12 months / payment at 9 months + 1 day) are different dates; missing either costs real money.

Read our full rundown of common mistakes in micro entity accounts.

FAQs: FRS 105 and micro entities

Can a micro entity choose FRS 102 instead of FRS 105?

Yes. If you qualify as a micro entity you can still prepare small company accounts under FRS 102 Section 1A — at that point you’re using the small companies regime rather than the micro-entity provisions. Choose it if lenders need more detail or you’re about to outgrow the micro limits.

Do micro-entity accounts need a directors’ report?

No. Micro entities are not required to prepare a directors’ report, a cash flow statement or a statement of changes in equity under FRS 105.

Are FRS 105 profit figures public?

Not at Companies House — you file only the balance sheet and notes, so your P&L stays private. The planned April 2027 mandatory P&L disclosure has been paused and is under review; companies will get at least 21 months’ notice of any change. HMRC still receives your full accounts with your CT600.

Does FRS 105 mean no audit?

Correct — qualifying micro entities are exempt from the statutory audit, and no accountant’s report is required for filing. The directors sign the balance sheet to confirm it.

Can FRS 105 accounts revalue assets?

No. FRS 105 requires assets to be recorded at historical cost less depreciation. Fair value accounting and asset revaluations aren’t permitted — one of the trade-offs for the simpler regime.

How we can help with your FRS 105 accounts

At Micro Entity Accounts, we specialise in preparing and filing FRS 105 accounts for small UK businesses — including micro entity accounts for startups, side hustles and established companies. Our fixed-fee service covers:

• Preparation of your FRS 105 accounts
• Filing with Companies House
• Corporation Tax return (CT600) preparation and HMRC submission
• Deadline monitoring so you never miss a filing date

Transparent fixed fees, no hidden costs. Call us on +44 20 3441 1258 or explore our FRS 105 micro entity accounts service to get started.