What Do Micro-Entity Accounts Actually Include? (UK Guide)

You know your company qualifies as a micro-entity. You've read that the accounts are simpler. But when it's time to actually prepare your year-end accounts, you might still be wondering: what exactly do I need to include?

If you're feeling uncertain about what micro-entity accounts should contain, you're not alone. This guide will walk you through exactly what you need to prepare, what you don't, and why keeping it simple matters.

What Are Micro-Entity Accounts?

Micro-entity accounts are simplified statutory accounts designed specifically for the UK's smallest limited companies. They're a streamlined version of full company accounts, with fewer requirements and less complexity.

The micro-entity regime was introduced to reduce the administrative burden on very small businesses. Instead of preparing detailed financial statements with extensive notes and disclosures, micro-entities can prepare basic accounts that focus on the essentials.

If you're not sure whether your company qualifies as a micro-entity, you can learn more about the size thresholds and eligibility criteria in our introductory guide.

What Do Micro-Entity Accounts Include?

When you prepare your micro-entity accounts, you need to include the following components:

• A simplified balance sheet – showing what your company owns and owes at the end of the financial year
• A profit and loss account – showing your income and expenses for the year (prepared for your records, but not publicly filed)
• Minimal notes – only if specific circumstances apply to your company (most micro-entities won't need these)
• A directors' approval statement – confirming that the directors have approved the accounts

That's it. No lengthy notes explaining accounting policies, no detailed breakdowns of every figure, no complex disclosures about financial instruments or deferred tax.

What You DON'T Need to Include (Important)

Understanding what you don't need is just as important as knowing what you do. Micro-entities benefit from significant exemptions:

• No directors' report – you don't need to prepare a separate strategic report or directors' commentary
• No detailed notes to the accounts – unless you have exceptional items like share capital changes, you can skip the extensive notes that larger companies must include
• No public filing of profit and loss – your income and expenses stay private; only the balance sheet goes to Companies House
• No cash flow statement – micro-entities are exempt from preparing cash flow statements
• No complex disclosures – no need for detailed breakdowns of debtors, creditors, or accounting policy explanations

The Micro-Entity Balance Sheet (Explained Simply)

The balance sheet is the main financial statement you'll file publicly. It provides a snapshot of your company's financial position on the last day of your financial year.

A micro-entity balance sheet shows:

• Fixed assets – items the company owns and plans to keep long-term, like equipment or vehicles
• Current assets – things that will be converted to cash within a year, like bank balances, money owed to you, and stock
• Liabilities – money your company owes, including loans, creditors, and unpaid expenses
• Capital and reserves – the value that belongs to the shareholders, including share capital and retained profits

The balance sheet for micro-entities uses a simplified format with fewer line items than standard accounts. For example, instead of breaking down debtors into multiple categories, you might show a single figure for amounts owed to the company.

Even though it's simplified, the balance sheet still matters. It shows whether your company is financially stable and whether assets exceed liabilities. Banks and other stakeholders may request this when assessing your business.

Profit and Loss for Micro-Entities

Your profit and loss account (also called an income statement) shows how your company performed during the financial year. It matches income earned against expenses incurred to calculate your profit or loss.

For micro-entities, this typically includes:

• Income – revenue from sales, services provided, or other business activities
• Expenses – costs incurred running the business, such as supplies, travel, software, professional fees, and staff costs
• Profit or loss – the difference between total income and total expenses

Although you prepare a profit and loss account, you don't file it with Companies House. You keep it in your company records and share it with HMRC when filing your Corporation Tax return.

Many micro-entities use cash-basis accounting for their day-to-day bookkeeping, which can simplify this process. With cash-basis accounting, you record transactions when money actually moves rather than when invoices are raised. This often aligns more naturally with how small businesses think about their finances.

Common Mistakes Micro-Entities Make

Even though micro-entity accounts are simpler, it's still easy to make mistakes. Here are some common pitfalls:

Using Software Built for Larger Businesses

Many micro-entities start using accounting software designed for much larger companies. These systems often include features, categories, and complexity that micro-entities simply don't need. This can lead to confusion, wasted time, and accounts that are harder to understand than they should be.

Overcomplicating Transaction Categories

You don't need dozens of expense categories or intricate coding systems. Micro-entity accounts benefit from simplicity. Using too many categories makes your bookkeeping harder to maintain and doesn't add value for such small-scale reporting.

Relying on Automation You Don't Understand

Automated bank feeds and rules can save time, but they can also hide errors. If transactions are automatically categorised without review, mistakes accumulate. For micro-entities, it's often better to review and confirm each transaction yourself to maintain clarity and control.

Including Transactions You Haven't Reviewed

Blindly importing all bank transactions without checking them can lead to errors in your accounts. Personal expenses might slip through, or transactions might be miscategorised. Taking time to review ensures your accounts accurately reflect your business activity.

Why Simplicity Matters for Micro-Entity Accounts

The entire point of the micro-entity regime is to make accounting simpler and more proportionate for very small businesses. Keeping your bookkeeping and reporting process simple isn't a limitation—it's a strength.

When your accounting is straightforward:

• You're less likely to make mistakes
• You can actually understand your financial position
• You spend less time on admin and more time on your business
• You have confidence in the numbers you're reporting

Complexity doesn't add credibility for micro-entities. Clear, accurate, simple accounts that you understand and can explain are far more valuable than complicated spreadsheets or reports filled with jargon.

Bridgly: Built Around Micro-Entity Accounts

Most accounting software wasn't designed with micro-entities in mind. It was built for larger businesses with complex needs, then scaled down. This often leaves micro-entities with tools that feel overcomplicated and overwhelming.

Bridgly takes a different approach. It's being built specifically for UK micro-entity limited companies that use cash-basis accounting. Instead of trying to do everything, it focuses on doing the essentials really well.

With Bridgly, you review your transactions, categorise them simply, and generate the reports you actually need for your micro-entity accounts. No feature bloat, no confusing automation, no steep learning curve. Just clear bookkeeping that helps you prepare accurate accounts with confidence.