If your company signs off a directors' report every year, that requirement is going. The government committed to removing it in October 2025, and on 7 September 2026 it opened a 12-week consultation on the rest of the annual report. Responses close at 11:59pm on 30 November.
TL;DR: The directors' report will be removed for all UK companies, affecting around 440,000 of them. Up to 44,000 medium-sized private companies and roughly 7,000 wholly-owned subsidiaries will stop preparing a strategic report. A wider consultation covering audit, digital filing and the whole annual report runs until 30 November 2026.
What is actually changing in UK corporate reporting?
Two changes are settled and one large question is still open. Settled: the directors' report goes for every UK company, and most medium-sized private companies stop preparing a strategic report. Open: whether medium-sized companies should also lose the statutory audit.
Both settled changes came in a written ministerial statement on 21 October 2025, which described the directors' report as cluttered and compliance-driven, offering little useful insight to investors (UK Parliament, 2025). The Department for Business and Trade estimated the strategic report exemptions alone would cover around 51,000 companies, with the two measures together saving roughly £230 million a year.
The second stage arrived on 7 September 2026 with a consultation titled Modernising Corporate Reporting to support long-term economic growth (GOV.UK, 2026). It covers financial reporting, non-financial reporting, corporate governance, remuneration and digital reporting.
Who loses the directors' report requirement?
Every UK company that currently prepares one. ICAEW puts that figure at around 440,000 companies (ICAEW, 2025). Micro-entities are already exempt, so the change lands on small, medium and large companies.
The directors' report is being abolished as a document, but not everything inside it disappears. Some disclosures move to other parts of the annual report, and others are dropped altogether. Energy and carbon reporting is the clearest example of content expected to relocate rather than vanish.
In our experience, the practical effect for a typical owner-managed company is modest. The directors' report in a small company's accounts is often half a page listing the directors and a dividend figure. The saving is real but small at that end of the scale.
The strategic report exemption targets medium-sized companies
Most medium-sized private companies, up to 44,000 of them, along with around 7,000 wholly-owned subsidiaries whose disclosures already appear in their UK parent's annual report. Small companies are already exempt and see no change here.
A company is medium-sized if it meets two of these three tests: turnover of no more than £54 million, a balance sheet total of no more than £27 million, and no more than 250 employees. Those monetary thresholds rose by roughly half for financial years beginning on or after 6 April 2025 (ICAEW, 2025), so some companies that were large on the old numbers now sit in the medium band.
What we see most often is directors assuming their size category has not moved since the threshold uplift. It is worth rechecking, because the strategic report exemption will follow that classification.
Could medium-sized companies lose the audit requirement too?
That is the biggest open question in the consultation. It asks whether small and medium-sized companies should sit in a single category, which would remove mandatory audit for most medium-sized companies and drop the requirement to prepare consolidated accounts.
Nothing has been decided. ICAEW chief executive Alan Vallance welcomed the reform programme but urged ministers to take time so that all stakeholders are heard and all options considered. Lenders, investors and acquirers often rely on audited figures, so a company that drops an audit it currently has may find its bank asks for something else instead.
The government puts total savings from the reform programme at more than £450 million a year, including changes already introduced (GOV.UK, 2026).
Your next set of accounts is unaffected
None of this changes what you file today. The directors' report and strategic report rules still sit in the Companies Act 2006, and removing them needs legislation that has not yet been laid. No commencement date has been announced for either measure.
Treat the current year as business as usual. If your year end has just passed, prepare the directors' report as normal and follow the standard year-end accounts checklist. The separate Companies House accounts reform, which ends abridged accounts and requires software filing, runs on its own timetable and is covered in our guide to the 2028 small company filing changes.
What should you do before 30 November?
Two things, and only one of them is urgent. If the audit question affects you, respond to the consultation. You can use the online form on the GOV.UK consultation page or email mcr.review@businessandtrade.gov.uk before 11:59pm on 30 November 2026.
The second is planning. If you are a medium-sized company that currently audits, ask your lender and any shareholders outside the business whether they would still expect audited accounts if the law stopped requiring them. One question clients always ask is whether dropping an audit hurts a future sale. It can, because buyers discount unaudited figures, so the answer depends on your exit horizon.
Directors also still need to finish identity verification at Companies House, and the late filing penalties that apply today have not changed.
Frequently Asked Questions
Do I still need to file a directors' report this year?
Yes. The requirement remains in the Companies Act 2006 until legislation removes it, and no commencement date has been set. Prepare and file as normal for your current year end.
Does scrapping the directors' report mean less disclosure overall?
Not entirely. Some content is being deleted, but other disclosures move elsewhere in the annual report. Energy and carbon reporting is expected to relocate rather than disappear, so check where each item lands before assuming it has gone.
My company is small. Does any of this affect me?
Only the directors' report change. Small companies are already exempt from the strategic report, and micro-entities are already exempt from the directors' report. The audit question in the consultation is aimed at the medium-sized band.
How do I respond to the consultation?
Use the online response form linked from the GOV.UK consultation page, or email mcr.review@businessandtrade.gov.uk. Responses close at 11:59pm on 30 November 2026. Written submissions can also go to the Company Law and Governance Directorate at the Department for Business and Trade.
Will medium-sized companies definitely lose their audit?
No. It is a consultation question, not a decision. Any change would need legislation, and the government has not indicated a preferred outcome.
If you are a medium-sized company weighing up what a lighter reporting regime would mean for your accounts, your audit and your lender, get in touch. We can review your size classification against the current thresholds and set out what changes and what stays.