Preparing annual accounts is an important responsibility for every UK limited company. For a qualifying micro-entity, the reporting process can be simpler than it is for larger businesses, but the accounts still need to be accurate and prepared according to the relevant requirements.

If you are a company director preparing your accounts for the first time, knowing what to check at each stage can make the process much easier. This guide explains how to prepare Micro Entity Accounts step by step.

Step 1: Check Whether Your Company Qualifies

Before preparing the accounts, confirm that your company qualifies as a micro-entity.

For accounting periods beginning on or after 6 April 2025, a company generally needs to meet at least two of these three conditions:

• Turnover of £1 million or less

• Balance sheet total of £500,000 or less

• Average of 10 employees or fewer

There are also exclusions that can prevent certain companies from using the micro-entity regime. Therefore, meeting the financial thresholds alone is not always enough.

If your company has grown significantly since the previous year, check the criteria again rather than automatically using the same reporting category.

Step 2: Bring Your Bookkeeping Up to Date

Accurate accounts start with accurate bookkeeping.

Before preparing your Micro Entity Accounts, make sure all business transactions for the financial year have been recorded. This includes income, purchases, expenses, bank transactions and other financial activity.

Check your business bank account against your bookkeeping records and investigate any unexplained differences.

It is also useful to organise invoices and receipts at this stage. Having the supporting records available makes it easier to identify missing transactions and answer questions about individual figures.

Step 3: Check Sales and Expenses

Review the company's income and expenditure carefully.

Make sure sales invoices have been recorded in the correct accounting period. The same applies to supplier invoices and business expenses.

Look for expenses that may have been paid personally by a director, subscriptions paid annually and bills that relate to the financial year but have not yet been paid.

Small errors can affect the final figures, so a proper review is worthwhile before moving on to the accounts.

Step 4: Review Assets and Liabilities

The balance sheet needs to show what the company owns and owes at the end of the financial year.

Review items such as:

• Cash at bank

• Trade debtors

• Equipment and other fixed assets

• Stock, where applicable

• Supplier balances

• Loans

• Corporation Tax liabilities

• VAT or PAYE balances

• Director loan accounts

Check that these figures agree with your underlying records.

If the company purchased equipment or other assets during the year, make sure they have been accounted for correctly rather than simply being treated as an ordinary expense.

Step 5: Review the Director's Loan Account

For many small companies, the director's loan account deserves particular attention.

If a director has paid company expenses personally, taken money from the company or introduced personal funds into the business, these transactions may need to be reflected in the director's loan account.

Do not simply assume that money transferred between the director and company is salary or an expense. The correct treatment depends on the circumstances.

Where the balance is unusual or difficult to reconcile, professional accounting advice can help prevent problems later.

Step 6: Prepare the Statutory Accounts

Once the records have been checked, the statutory accounts can be prepared.

Micro-entities can currently use simplified accounting provisions. They can prepare simpler accounts that meet the statutory minimum requirements and generally deliver only their balance sheet, with less information, to Companies House. A micro-entity can also benefit from certain exemptions available to small companies.

The accounts still need to contain the required information and statements. The balance sheet must include the appropriate micro-entity statement and be signed by a director.

This is where using appropriate accounting software or professional support can make the process easier.

Step 7: Check the Accounts Carefully

Never submit the accounts immediately after preparing them without a final review.

Check the company name, registration number, accounting period and financial figures. Compare important balances with your bookkeeping records and previous year's accounts.

Pay particular attention to:

• Bank balances

• Debtors and creditors

• Fixed assets

• Share capital

• Corporation Tax

• Director loan balances

• Accounting period dates

• Required statements and notes

A final review can catch simple mistakes before they reach Companies House.

Step 8: Approve the Accounts

The company's annual accounts must be approved by the directors before they are filed.

The balance sheet must include the name of a director and be signed by a director.

Keep a copy of the approved accounts and supporting records for your company's files.

Step 9: File the Accounts with Companies House

Once approved, the accounts can be filed with Companies House using an appropriate filing service.

Currently, eligible micro-entities can file their accounts online using the Companies House service. You will generally need your Companies House password and authentication code.

For most private limited companies, annual accounts are due nine months after the end of the company's financial year. First accounts have different rules, so check your company's specific filing deadline.

Do not leave filing until the final day. If something is rejected, there may not be enough time to correct it before the original deadline.

Step 10: Deal With Corporation Tax Separately

Preparing Micro Entity Accounts does not complete every tax responsibility of the company.

A limited company normally also needs to prepare and submit a Company Tax Return to HMRC. The deadlines for Companies House accounts and Corporation Tax are different.

Your accounts may provide much of the information needed for the tax return, but the two filings should not be treated as identical.

Step 11: Keep Copies of Everything

After filing, keep copies of the submitted accounts, filing confirmation and supporting financial records.

Good record keeping makes the following year's accounts easier and gives you evidence of what was submitted.

It also helps your accountant quickly understand the company's previous financial position if you decide to use professional support later.

Preparing for the 2028 Changes

Although the current micro-entity rules continue to apply, companies should be aware of the upcoming Companies House reforms.

From 1 April 2028, all companies will need to file annual accounts using commercial software. Micro-entities will also need to deliver a profit and loss account to Companies House, although they will have the option to opt out of having that information published on the public register.

This gives businesses time to review their bookkeeping and accounting processes before the new filing requirements take effect.

When Professional Support Makes Sense

Preparing Micro Entity Accounts yourself can be manageable when the company's finances are straightforward and your records are well organised.

However, professional help can be useful if your company has director loans, fixed assets, VAT, payroll, several sources of income or unusual transactions.

An accountant can review your records, prepare the accounts and help ensure that the correct reporting requirements are followed.

Final Thoughts

Preparing Micro Entity Accounts is easier when you approach the work in stages. Start by checking eligibility, bring your bookkeeping up to date, review the company's assets and liabilities, prepare the accounts and check everything carefully before filing.

The current regime provides simpler reporting for qualifying micro-entities, but directors remain responsible for ensuring their accounts are accurate and filed on time.

With further Companies House reforms confirmed for April 2028, keeping your accounting records organised now can also make the future transition much smoother.

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