Thousands of small businesses across the UK have expressed alarm at sweeping new Companies House regulations that will require them to disclose sensitive financial data and switch to commercial software to file their accounts.
Under changes set to take effect from April 2027, small and micro businesses will for the first time be required to submit a profit and loss statement as part of their annual accounts — removing long-standing exemptions that previously shielded such firms from disclosing detailed financial information publicly.
In a further shake-up, Companies House confirmed that all limited companies will be required to file their accounts using commercial accounting software, as it phases out its existing web-based and paper-filing systems. The agency said this move is intended to “improve the accuracy and quality of data” and reduce fraud.
But business leaders warned the reforms could add cost, complexity and commercial risk for smaller firms already struggling with inflation and rising tax burdens.
“Small business owners are deeply concerned at this regulatory expansion,” said Martin McTague, national chair of the Federation of Small Businesses (FSB). “It will force those who don’t already use reporting software from big providers to adopt new systems and shoulder the cost and upheaval.”
McTague also raised alarm over the requirement to file profit and loss accounts, which until now had only applied to larger firms. “This opens the door wide to competitors snooping on margins and for large companies in supply chains to scrutinise smaller suppliers’ finances. It could give big players an unfair advantage and damage small firms’ negotiating power.”
The new rules form part of a wider corporate transparency overhaul passed into law last year under the Economic Crime and Corporate Transparency Act. The government and Companies House have been under pressure to improve the integrity of the UK’s business register following a spate of scandals involving shell companies, fraud and the use of limited companies for money laundering.
Companies House said in a statement: “The move to software filing is a critical step in improving the accuracy and quality of data on the register by reducing errors and formatting issues. It will also speed up processing times and help Companies House detect and prevent fraud more effectively.”
However, critics argue that the changes, while well-intentioned, risk penalising law-abiding small companies by removing privacy protections.
Under current rules, small and micro-entity companies can file abridged accounts with limited financial detail — a policy designed to reduce red tape and protect commercial confidentiality. From 2027, abridged accounts will no longer be allowed.
The reforms will also affect the thresholds for audit exemptions and potentially change the accounting reference periods that firms use to file, with more announcements expected “in the coming months,” according to Companies House.
Although a public consultation on transparency reforms was held in 2019, and legislation was passed last year, many small business owners say they were blindsided by the formal notification this week.
“Many directors had no idea this was coming,” said Claire Bennet, an accountant in Nottingham who works with SMEs. “They’re now asking whether they need to switch software, how much it will cost, and what exactly has to be disclosed.”
Companies House said it had written directly to all registered UK companies to give them “plenty of time to prepare” for the changes.
Critics warn the changes may deter would-be entrepreneurs from incorporating a limited company, traditionally one of the most accessible ways to start a small business.
“These changes make the system less friendly for small business owners at a time when the UK desperately needs more enterprise and growth,” McTague said. “Instead of encouraging innovation and start-ups, the government risks making incorporation more onerous and exposing small businesses to unnecessary risk.”
He added that the FSB would be pushing for transitional support, simplified reporting tools, and clarity on how profit disclosures will be used by regulators and third parties.
While business transparency and fraud prevention are widely seen as critical goals, many in the SME sector say the current approach may go too far, too fast — and could have unintended consequences for competitiveness and confidence in the small business ecosystem.
