If you’re an accountant gearing up for the UK accounting regulation changes 2025, you may be wondering exactly how all these new rules will affect your day-to-day work. These adjustments, from revised standards to shifting company-size thresholds, can seem daunting at first. The good news? With the right prep, you’ll be ready to handle them confidently. Below, you’ll find a practical rundown of what to expect and how you can adapt without losing sleep over it.
Understand the evolving regulations
A major focus of these regulatory updates is ensuring that UK GAAP (Generally Accepted Accounting Practice) moves closer to international standards. Starting 1 January 2026, FRS 102 will be updated to align more closely with IFRS 16 and IFRS 15 (FinQuery: https://finquery.com/blog/frs-102-changes/). You can expect big shifts in how you handle lease transactions, revenue recognition, and disclosures in your financial statements.
- Aligning UK GAAP with IFRS: This means more transparency in your financials but also more detailed reporting.
- Potential benefits: Tighter alignment can reduce confusion if you also work with international clients or subsidiaries.
By getting familiar with the changes now, you’ll avoid a mad scramble once 2025 rolls around.
What changes are coming in 2025?
The revisions to FRS 102 officially take effect for accounting periods beginning on or after 1 January 2026, but much of the legwork will happen in 2025. The Financial Reporting Council (FRC) has also revised the UK Corporate Governance Code, set to apply from 2026, placing more emphasis on the board’s responsibility for internal controls (PwC UK: https://viewpoint.pwc.com/uk/en/pwc/yearendaccountinguk/June2025.html).
Key reasons to stay compliant
- Avoid penalties or restatements that could damage your firm’s credibility.
- Show that you meet international best practice standards.
- Give stakeholders clearer insights through more consistent reporting.
Adopt the revised FRS 102
If you’re currently applying FRS 102, you’ll need to note changes in lease accounting and revenue recognition (FinQuery: https://finquery.com/blog/frs-102-changes/). The shift aims to align your financial statements with IFRS, especially IFRS 16 and IFRS 15.
Lease accounting approach
Previously, you likely separated finance leases from operating leases. Under the updated FRS 102, most leases will appear on balance sheet, mirroring IFRS 16 (FinQuery: https://finquery.com/blog/frs-102-changes/). A new rate option called the “obtainable borrowing rate” (OBR) joins the implicit rate and the incremental borrowing rate for discounting leases.
- Leases on the balance sheet: Expect greater visibility into your lease obligations and how they affect your company’s debt ratios.
- Exemptions: Short-term and low-value leases will likely qualify for optional relief (Netgain: https://www.netgain.tech/blog/uk-lease-accounting-standards-explained-2025).
Revenue recognition alignment
The revised FRS 102 also moves closer to IFRS 15 by centering on the transfer of control rather than just risks and rewards (FinQuery: https://finquery.com/blog/frs-102-changes/). That means you’ll apply a more rigorous five-step model, evaluating each contract’s performance obligations and timing of revenue.
- Five-step model: Identify contract, separate obligations, determine transaction price, allocate price, and recognize revenue as you fulfill obligations.
- Impact on long-term contracts: More detailed tracking of milestones or performance targets will be needed.
Prepare for IFRS 16 approach
If you’ve kept an eye on international standards, the new lease model might feel familiar. The biggest difference is the OBR in FRS 102, which gives you an extra option for calculating the discount rate (FinQuery: https://finquery.com/blog/frs-102-changes/).
Recognizing almost all leases
In practice, putting leases on the balance sheet changes your metrics. Operating leases will no longer be invisible. This shift can alter how lenders view your finances and might affect compliance with loan covenants.
The new discount rate rules
Though IFRS 16 often uses the implicit or incremental borrowing rate, FRS 102 is letting you use OBR. This can alter the final measurement of your lease liability, so you should confirm which rate suits your situation best.
Address directors’ obligations
Directors face their own set of changes under updated UK rules. From Directors’ remuneration reports to Companies House obligations, you’ll want to keep your eyes peeled for new filing requirements.
Companies House changes in 2025
The government has considered reversing certain Companies House reforms that were planned for 2027, meaning some extra burdens on SMEs may be lifted (International Accounting Bulletin: https://www.internationalaccountingbulletin.com/news/uks-reversal-companies-house-reforms/). Even so, you’ll still want to track ID verification rules for directors and shareholders.
- ID checks: Prepare for mandatory identity verification if you haven’t done so already.
- Potential delayed reforms: If reversed, smaller companies may get more breathing space before adopting new filing software requirements.
Updated remuneration disclosures
New regulations for directors’ remuneration reports remove overlapping disclosures introduced under the EU Shareholder Rights Directive (PwC UK: https://viewpoint.pwc.com/uk/en/pwc/yearendaccountinguk/June2025.html). Essentially, you might see simplified templates for showing total compensation.
Assess new threshold changes
Company-size thresholds for micro, small, and medium entities have also gone up by 50% in some cases (Fresh Accountancy: https://freshaccountancy.co.uk/insights/new-2025-26-uk-accounting-and-reporting-rules/). Check where your organization now falls because that could change what you need to disclose.
Micro, small, and medium thresholds
- Micro-entity threshold raised: More businesses may qualify for simplified reporting.
- Small and medium reclassification: If you cross these raised thresholds, more extensive disclosures might not apply until you exceed the new limits.
Implications for your accounts
- Reduced disclosures: Good news if your business stays under the new threshold.
- Additional detail: If you jump into a higher category, you’ll need to provide more robust financial statements and governance reporting.
Get ready for 2025
With so many moving parts, it pays to get your systems and people ready well ahead of any deadlines. From reassessing your contracts to updating accounting software, the investment you make now can save stress later.
Practical steps to take
- Map your leases: Check which ones might shift onto the balance sheet and note any short-term or low-value exemptions you’ll claim.
- Review revenue contracts: Set up a process for identifying performance obligations and transferring control.
- Update internal processes: Verify your software can handle the new discount rate options and extra disclosures.
- Train your team: Everyone from bookkeepers to CFOs should stay informed about the changes.
Conclusion: The road ahead
By taking a proactive approach, you’ll navigate these uk accounting regulation changes 2025 without drama. Think of it as an opportunity to streamline your financial reporting and show stakeholders a clearer picture of your business. If you start your prep now, you’ll be well on your way to meeting every requirement and delivering reliable, insightful figures to clients and regulators alike.
