Dormant Accounts vs Micro-Entity Accounts: What's the Difference?
If you run a small UK limited company, you may be able to file either dormant accounts or micro-entity accounts with Companies House. Both options can reduce the amount of financial information your company needs to publish, but they apply in different circumstances. The main difference is that dormant accounts are for companies with no significant accounting transactions during the financial year, while micro-entity accounts are for eligible companies that meet specific size criteria. A company can be small enough to qualify as a micro-entity but still be too active to file dormant accounts.
Choosing the correct type of accounts matters. Filing dormant accounts when your company has recorded transactions that prevent dormant status can result in inaccurate statutory filings. Conversely, an eligible dormant company may be able to use simpler dormant accounts rather than prepare micro-entity accounts. This guide explains the differences, eligibility rules, filing requirements, costs and practical considerations for founders, directors and international business owners managing UK companies.
What Are Dormant Accounts?
Dormant accounts are simplified annual accounts that an eligible company can file with Companies House when it has had no significant accounting transactions during the relevant financial year.
Under section 1169 of the Companies Act 2006, a company is generally dormant for Companies House purposes if it has had no significant accounting transactions during the period. These are transactions that must normally be entered into the company's accounting records, subject to specific statutory exceptions. Companies House disregards certain transactions when assessing dormancy, including:
- Fees paid to Companies House for filing documents such as a confirmation statement or a change of company name.
- Penalties for filing accounts late.
- Money paid for shares when the company was incorporated by its original subscribers.
Ordinary bank charges, customer payments, interest received and many other transactions are not included in these exceptions. For example, a company that was incorporated but never started trading may qualify as dormant if its only transaction was the original subscriber-share payment. However, if its bank account incurs monthly maintenance fees, it will generally not qualify as dormant for that financial year.
Dormant accounts are particularly useful for companies that have stopped trading, have not yet launched or are being maintained without significant financial activity.
What Are Micro-Entity Accounts?
Micro-entity accounts are simplified statutory accounts available to companies that meet the legal definition of a micro-entity and are not excluded from using the regime. Unlike dormant accounts, micro-entity accounts do not require the company to have stopped trading. An eligible company can earn revenue, pay expenses, employ staff and carry out normal business activities while using the micro-entity reporting framework.
The regime allows qualifying businesses to prepare accounts using specific simplified accounting provisions. Eligible companies can also benefit from certain filing and audit exemptions. For accounting periods beginning on or after 6 April 2025, a company generally qualifies as a micro-entity if it meets at least two of these three conditions:
- Annual turnover of no more than £1 million.
- Balance sheet total of no more than £500,000.
- An average of no more than 10 employees.
Additional rules apply to groups, and certain types of company cannot use the micro-entity regime even if their financial figures fall below these thresholds. For companies with financial years beginning before 6 April 2025, the previous thresholds generally apply: turnover of no more than £632,000, a balance sheet total of no more than £316,000 and an average of no more than 10 employees.
The relevant thresholds depend on the beginning of the accounting period, so directors should check the rules applicable to their company's financial year. The government's Companies House accounts guidance explains the eligibility requirements and reporting provisions.
Dormant Accounts vs Micro-Entity Accounts: Key Differences
Although both options can reduce reporting requirements, they are not interchangeable.
| Feature | Dormant accounts | Micro-entity accounts |
|---|---|---|
| Main eligibility test | No significant accounting transactions during the financial year | Meets the legal micro-entity size criteria and is not excluded |
| Can the company be trading? | It can be dormant after ceasing activity, but significant transactions can prevent dormant status | Yes |
| Can it earn revenue? | Revenue transactions generally prevent dormant status | Yes |
| Can it incur normal business expenses? | Such expenses generally prevent dormant status | Yes |
| Financial reporting | Very simplified dormant balance sheet and required notes | Accounts prepared under the micro-entity accounting provisions |
| Profit and loss account | Not required as part of dormant accounts filed with Companies House | Generally prepared for the company's members, but currently not required to be filed publicly with Companies House |
| Audit | Eligible dormant companies generally do not need an audit | Eligible micro-entities can usually claim audit exemption, subject to the rules |
| Annual accounts required? | Yes | Yes |
| Confirmation statement required? | Yes | Yes |
The central distinction is that dormancy concerns financial activity, whereas micro-entity status concerns company size and eligibility for a particular accounting regime. A company can be eligible for micro-entity accounts while trading normally. A dormant company may also fall within the micro-entity size limits, but its lack of significant transactions makes dormant accounts the more directly relevant filing option if it qualifies.
Which Accounts Should Your Company File?
The right choice depends on what your company has actually done during the financial year, not simply on its turnover or bank balance.
Scenario 1: A company that has never traded
Suppose you incorporated a UK limited company to develop a consultancy business, but you have not launched it. The only accounting transaction was the payment for the original subscriber shares.
If the company has no other significant accounting transactions, it may qualify as dormant for Companies House purposes. In this situation, dormant accounts may be appropriate, provided the company meets the relevant requirements.
Scenario 2: A small company with regular sales
Imagine a digital marketing company with annual turnover of £80,000, four employees and a balance sheet total of £30,000. The business is actively trading, but it meets the micro-entity thresholds on all three measures. Assuming it is not excluded from the regime and satisfies the applicable qualification rules, it may be able to prepare and file micro-entity accounts. It cannot use dormant accounts merely because it is small or because its profits are low.
Scenario 3: A company that has stopped trading but still pays bank fees
A company may have ceased trading but continue to incur monthly bank charges. Although the business has no sales or customers, ordinary bank charges generally count as significant accounting transactions. The company would therefore usually need to file accounts reflecting those transactions rather than dormant accounts for that financial year. If the company is eligible for the micro-entity regime, micro-entity accounts may be an option.
Scenario 4: A company that is dormant now but traded previously
A company that traded in an earlier financial year may qualify as dormant in a later period if it has no significant accounting transactions during that later period, subject to the statutory rules. It is not necessary for a company to have been dormant since incorporation. Its status must be assessed for the relevant accounting period.
What Information Must Each Type of Account Include?
The filing requirements differ because dormant accounts and micro-entity accounts serve different purposes.
Dormant accounts
Eligible dormant companies can generally file a simplified balance sheet with the required statements and notes. The accounts normally include:
- A balance sheet showing the company's financial position at the end of the financial year.
- The required statement that the company is dormant.
- The director's signature and printed name.
- Any required notes and comparative figures.
A dormant company does not generally need to file a profit and loss account or a directors' report with Companies House as part of its dormant accounts. The simplified format does not mean directors can ignore the company's records. They should retain appropriate accounting information and ensure the accounts accurately reflect the company's position.
Micro-entity accounts
A micro-entity must prepare accounts in accordance with the relevant micro-entity provisions. These generally include a balance sheet, a profit and loss account and any required notes, subject to the applicable rules and exemptions. The balance sheet must contain the prescribed statement confirming that the accounts have been prepared under the micro-entity provisions. It must also be approved and signed by a director, with the director's printed name included.
Currently, eligible micro-entities can generally file a simplified balance sheet with Companies House without publicly filing their profit and loss account. However, they must still prepare the required accounts for their members. This distinction is important: not having to publish the profit and loss account does not mean a micro-entity does not need to prepare one.
Companies House has announced that from 1 April 2028, micro-entities will be required to deliver a copy of their profit and loss account, with an option to opt out of public disclosure. Filing arrangements are also due to change, including a move to commercial software. Companies planning their reporting processes should monitor the official Companies House accounts reform announcement.
Do Dormant and Micro-Entity Accounts Have the Same Deadlines?
Both types of accounts are subject to the applicable Companies House filing deadline. Choosing dormant accounts does not give a company extra time to file. For most private limited companies, annual accounts must be filed within nine months of the end of the financial year. Different rules apply to first accounts, including the general deadline of 21 months after incorporation for a company's first accounts, subject to the applicable requirements.
Directors should confirm the company's actual deadline rather than relying on a general rule. Late filing penalties for private limited companies are currently:
| How late the accounts are | Penalty |
|---|---|
| Up to one month | £150 |
| More than one month, up to three months | £375 |
| More than three months, up to six months | £750 |
| More than six months | £1,500 |
The penalty is doubled if the accounts are filed late in two successive financial years. Failure to file accounts can also lead to further consequences, including potential prosecution of directors and strike-off action. These penalties apply to late accounts, whether the company is dormant or trading.
Does HMRC Treat Dormant and Micro-Entity Companies Differently?
Yes. Companies House reporting categories should not be confused with a company's Corporation Tax status. Companies House assesses dormancy primarily by reference to significant accounting transactions, subject to statutory exceptions. HMRC considers whether the company is active for Corporation Tax purposes, taking account of its business activity and tax circumstances.
A company might be dormant for Companies House purposes but still need to deal with an HMRC filing obligation. Equally, a company that is not dormant for Companies House purposes because it has incurred bank charges may still be considered dormant for Corporation Tax purposes, depending on its circumstances.
Micro-entity status is a separate accounting classification. It does not automatically exempt a company from Corporation Tax obligations or Company Tax Return requirements. If HMRC has issued a notice requiring a Company Tax Return, the company generally needs to submit it unless HMRC withdraws the notice or confirms otherwise. Directors should therefore assess three questions separately:
- Does the company qualify as dormant for Companies House purposes?
- Does it qualify for the micro-entity accounting regime?
- What Corporation Tax reporting obligations apply to it?
Answering these questions independently helps avoid filing errors and unnecessary confusion.
How to Choose the Right Accounts: A Practical Checklist
Before preparing your company's annual accounts, work through the following checks.
Choose dormant accounts if:
- The company has had no significant accounting transactions during the financial year.
- Any transactions that occurred fall within the statutory exceptions.
- The company meets the applicable conditions for filing dormant accounts.
Consider micro-entity accounts if:
- The company meets at least two of the relevant size thresholds.
- It is not excluded from the micro-entity regime.
- It has trading activity or other transactions that prevent it from qualifying as dormant.
- The company can use the relevant simplified accounting and filing provisions.
If the company has transactions but does not qualify as a micro-entity, it may still qualify for the small companies regime. Other reporting requirements may apply depending on its size, structure and circumstances.
For founders managing UK companies from overseas, it is particularly useful to review bank statements, shareholder funding, business expenses and filing deadlines before selecting the accounts format. IncorpUK, a UK company formation and management platform for global founders, operates in a context where understanding these distinctions can help businesses maintain compliance throughout periods of trading and inactivity.
Frequently Asked Questions
1. Are dormant accounts simpler than micro-entity accounts?
Generally, yes. Dormant accounts usually require a simplified balance sheet and relevant statements and notes. Micro-entity accounts follow a specific accounting framework and must reflect the company's financial activity, although eligible companies benefit from simplified reporting provisions.
2. Can a company file dormant accounts if it qualifies as a micro-entity?
Yes, if it also meets the Companies House dormancy requirements and is eligible to file dormant accounts. Meeting the micro-entity size thresholds alone is not enough.
3. Can a trading company file micro-entity accounts?
Yes. An eligible company can trade, earn revenue and incur expenses while using the micro-entity regime. It must satisfy the relevant size criteria and must not fall within an excluded category.
4. Do micro-entities need to prepare a profit and loss account?
Yes, generally. Eligible micro-entities must prepare a profit and loss account for their members under the applicable rules, even though they can currently omit it from the copy filed publicly with Companies House. Filing requirements are due to change from 1 April 2028.
5. Do dormant companies need to file confirmation statements?
Yes. Dormant companies generally must continue filing confirmation statements and annual accounts with Companies House. Dormant status does not remove these obligations.
6. Can a company change from dormant accounts to micro-entity accounts?
Yes. If the company begins undertaking significant accounting transactions, it may no longer qualify as dormant. If it meets the micro-entity criteria and is not excluded, it may be able to use micro-entity accounts for the relevant period.
7. Are micro-entity accounts exempt from audit?
Eligible micro-entities can generally claim audit exemption under the small companies regime. However, certain companies must have an audit, and specific circumstances can affect eligibility. The company should check the applicable rules before claiming exemption.
8. Does a dormant company have to file accounts every year?
Yes. A dormant UK limited company generally continues to file annual accounts unless a specific exemption applies. Some dormant subsidiaries may qualify for an exemption if they meet strict conditions.
Conclusion
The difference between dormant accounts and micro-entity accounts comes down to eligibility and financial activity. Dormant accounts are for companies that meet the Companies House dormancy test, while micro-entity accounts are designed for eligible companies that fall within the relevant size limits.
A small company is not automatically dormant, and a dormant company does not automatically need to use the micro-entity regime. The right filing option depends on the company's transactions, structure and reporting eligibility during the relevant financial year.
Before filing, review the company's bank statements and accounting records, check the applicable size thresholds, confirm whether any exclusions apply and establish the filing deadline. If the company's position is unclear, professional accounting advice can help prevent incorrect filings and avoidable penalties. Getting the distinction right allows directors to use the simplest reporting option legally available while meeting their ongoing Companies House and HMRC obligations.