Running a small or medium-sized enterprise (SME) can be both exciting and challenging. In the UK, SMEs make up a significant portion of the business community, with data from the Federation of Small Businesses indicating that they accounted for 99.9% of all companies at the start of 2024. Yet many SMEs overlook the value of frequent audits. Although certain smaller businesses are exempt from mandatory audits, scheduling them regularly can lead to a host of benefits, from strengthening financial transparency to improving overall performance.
Below, we discuss how regular audits for SMEs can support them during the 2025/26 tax year, outline current audit thresholds and share practical steps to help businesses prepare.
What audits involve and why they matter
An audit is an independent examination of your financial statements, records and systems. In simpler terms, it is a review carried out by someone outside your company to check that your books are accurate and that you are following relevant accounting rules. For SMEs, this is more than a compliance exercise – it can be a way to show investors, lenders and suppliers that you are a reliable partner.
Although the law sets out when an audit is compulsory, even those not required to undertake one can benefit from a closer look at their financial position. A thorough review can uncover small errors that might escalate over time, and it can highlight any internal processes in need of improvement.
Audit thresholds for 2025/26
Under current UK rules, SMEs do not usually need an audit if they meet two or more of the following criteria:
- an annual turnover of up to £10.2m
- a balance sheet total of up to £5.1m
- fewer than 50 employees.
These thresholds are expected to stay the same for the 2025/26 tax year unless the government announces updates. For the latest information, see Companies House guidance. Even if your business falls under these limits, an optional audit can support you in identifying areas where you could grow, tighten controls or reduce waste.
Strengthening financial transparency
It is easy to become focused on day-to-day trading and overlook the bigger picture. Routine audits create a snapshot of your financial health, providing clarity on your revenue, expenses and cashflow. This process can:
- ensure your financial statements are reliable
- highlight any irregularities or potential fraud
- reveal trends in spending or sales that might be hidden by routine bookkeeping.
In the 2025/26 tax year, corporation tax rates can be complex for some SMEs, especially when profits fall between the small profits rate threshold of £50,000 and the upper limit of £250,000. Having accurate books is essential when dealing with tiered rates. By conducting regular audits, you are more likely to file your returns correctly, avoid penalties and remain up to date with HMRC rules.
Boosting business performance
Finances are at the core of every enterprise. An audit examines how your systems work, meaning you can spot inefficient procedures or areas of unnecessary expenditure. If you notice a recurring problem, you can act before it has a big effect on your bottom line. Regular audits also help you plan more effectively – forecasts and budgets become more reliable when based on strong data.
When you present audited accounts to potential investors or lenders, you establish a stronger case for funding. A transparent and well managed business often attracts more favourable terms, whether you are applying for a loan, looking to grow or wanting to restructure existing finances.
Preparing for an audit
Even though an audit can feel like an extra step, good preparation makes the process more straightforward. Here are some steps to consider.
- Organise your documentation: Gather profit and loss statements, balance sheets, bank statements, expense receipts and payroll records. Keeping these in a clear, logical format will make the audit less time-consuming.
- Review accounting software: Verify that your chosen tools match the latest standards and are up to date. Mistakes often come from software that is not correctly aligned with current policies.
- Train and inform staff: Let key team members know an audit is coming. They can help gather documents and offer insights on day-to-day operations. This also sets the stage for open communication with the auditor.
- Work with specialists: Audits can involve detailed checks. Expert advice ensures that you follow proper guidelines and understand any adjustments that are recommended.
Additional considerations for SMEs
Some businesses choose to hold what is known as an internal audit before involving external auditors. This can be done by your own staff or via an outsourced service to test your financial procedures. If any issues arise, it is simpler to fix them before the formal audit takes place.
For the 2025/26 tax year, keep in mind that personal tax allowances in the UK have been frozen at £12,570, and the higher rate threshold stands at £50,270. If your company is structured in such a way that you draw a salary or dividends, having precise, audited figures can help with effective tax planning in line with these thresholds.
How we can help
As a London-based accountancy firm working with clients across the UK, we understand the importance of regular audits for SMEs. We offer tailored services that look at more than just the figures. By focusing on clarity and efficiency, we help you uncover potential gaps, streamline processes and present reliable accounts to third parties.
If you have not been through the audit process before, our team at Nicholas Peters & Co can guide you through each step, ensuring you have the right documents and reports in place. We also provide year-round support, so you can ask questions any time rather than dealing with surprises at the end of the financial year.
Our aim is to deliver a service that fits your goals. Whether you want an internal review, a full external audit or ongoing advice, we have a package that meets your needs. We work with all kinds of SMEs, covering industries from technology to hospitality. You can see more about our approach on our services page.
Would you like to schedule an audit or discuss your options further? Contact us and let us know your priorities. We are ready to help you strengthen your finances and plan for the future through regular audits for SMEs.