A Big Change That’s Been a Long Time Coming
These changes are part of the wider Economic Crime and Corporate Transparency Act 2023, but discussions about digital filing and increased transparency date back to 2019.
Companies House is pushing for:
- Full transition to software-based filing by April 2027
- Mandatory submission of P&L accounts for small and micro entities
- More data points available on the public register
- Greater ability to detect and prevent fraud
The stated aim? More accuracy, fewer mistakes, less fraud. And that’s good; financial crime costs the economy billions, and greater transparency is a noble goal. But what’s less clear is how this change affects the day-to-day reality for small businesses.
Let’s take a closer look.
1. Transparency Comes at a Cost: Privacy
For one- and two-person limited companies, this change feels especially heavy-handed. Directors may now have to make their remuneration and dividend income visible to the world - not just HMRC. There’s a fine line between corporate transparency and personal exposure, and this new approach seems to blur it.
Staff, suppliers, customers, competitors; everyone will be able to dig through your P&L with ease.
And that brings its own set of challenges.
2. Your Numbers, in the Hands of Competitors
One of the great advantages of being a small private company is discretion. Without the need to publish detailed financials, SMEs have long operated with a quiet advantage: able to negotiate, compete, and flex without revealing their hand.
This shift changes that. Big suppliers will see your margins. Competitors will reverse-engineer your cost base. Staff may start drawing conclusions from revenue or profit trends (and let’s be honest, not always accurately).
We’ve already seen what happens when sensitive financial information becomes watercooler chatter. This could amplify that tenfold.
3. Financial Crime and Data Quality: The Good News, and the Big Caveat
Let’s be fair: Companies House is right to want cleaner, more reliable data. And requiring software filings will go a long way towards that; reducing formatting errors and improving consistency across the register.
More importantly, exposing financial activity publicly makes life harder for fraudsters. Shell companies will have a tougher time hiding behind minimal disclosure. In that sense, the change is welcome.
But here’s the snag; companies have up to nine months after their year-end to file those accounts. That’s ancient history. A lot can change in nine months, especially in turbulent times.
So if trade creditors, lenders, or counterparties begin relying heavily on statutory P&Ls, without seeking explanation or context, businesses could be misjudged. We must hope that those reviewing accounts will also be willing to hear the full story.
4. Expect Accounting Tactics to Rise
We fully expect a rise in “accounting period gymnastics”. For instance, filing a poor year-end today, only to file a better 12-month period the next day. It’ll be a game of optics; how to get the improved results in the shop window as quickly as possible.
It may even become a strategic game, less about reporting what happened and more about managing the message. And that’s a risky shift.
Big, public companies spend untold amounts of money employing financial PR firms to get the messaging right. SMEs will face the same issues but without that assistance.
5. A Wider Move Towards Real-Time Reporting?
There’s a bigger trend emerging here. From 2026, self-employed sole traders earning over £50,000 a year will be required to report their income quarterly under the new Making Tax Digital (MTD) rules. That financial threshold decreases in subsequent years.
It’s clear that the UK government is moving towards a more granular and more frequent reporting culture for all entities. It’s transparency meets digital accountability.
While that may modernise the system, it also puts another burden on small firms. This change to company accounts lands alongside increases to:
- National Insurance contributions
- Minimum wage thresholds
- The Workers’ Rights Bill making it's way through Parliament currently
In isolation, these changes might be manageable. But stacked together, it’s a lot for SME owners to carry.
So What Should You Do Now?
We don’t yet have all the detail: exemptions, deadlines, accounting reference tweaks. But we know enough to get started.
Here’s our advice:
- Speak to your accountant or software provider now to make sure your filing setup is future-proof.
- Review your remuneration strategy (especially if you’re a director-owner) and assess what disclosure will look like post-2027.
- Start thinking about your narrative: what story do your numbers tell and how will third parties interpret them?
- Stay ahead of the curve; waiting until the last minute to change processes will cost you more in the long run.
Self-Test: Questions to Ask of Your Business
- How visible is your director remuneration, and are you comfortable with it becoming public knowledge?
- Could your profit margins be reverse-engineered by competitors using your new P&L disclosures?
- Do your statutory accounts actually reflect your current trading position? Or are they now just a historical artefact?
- How might your team react to having visibility on the company’s performance and director earnings?
- Are you using software that will meet Companies House’s new requirements? If not, how soon can you upgrade?
Final Thoughts
This isn’t just about digital filing, it’s a reshaping of the small business landscape. Transparency is increasing, but privacy and agility may be the trade-off. While it’s encouraging to see action being taken on financial crime, the consequences for SMEs could be significant.
