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As part of its move to reduce ‘red tape’ and aid business growth, the government has announced plans to remove the requirement for companies to include a directors’ report as part of their annual accounts.
Micro-entities are already exempted from the requirement to include a directors’ report in their accounts; however, it is intended that the requirement will be removed for all companies. It is estimated that this will affect approximately 440,000 companies.
Medium-sized private companies will also be exempted from the requirement to prepare a strategic report as part of their annual report and accounts.
Wholly-owned subsidiaries will also be exempted from preparing a strategic report, provided their disclosures are included in the UK parent company’s annual report and accounts.
Estimates suggest that these changes could save UK businesses in the region of £230 million each year, and legislation to bring about these changes will be introduced as soon as possible.
UK businesses are facing a “cost of business crisis”, according to the British Chambers of Commerce (BCC). Its new cost-stack calculator shows government policy alone has pushed up an average firm's expenses by 70% over the past decade, adding roughly £827,000 a year in costs for a typical mid-sized business. About a quarter of the rise stems from the increase in employer National Insurance contributions, with the higher minimum wage and mandatory pension auto-enrolment also major contributors.
Under Making Tax Digital (MTD) for Income Tax, sole traders and landlords with income of more than £50,000 have been required to keep digital records and send quarterly updates to HMRC since 6 April 2026.
