UK SME definition
What officially counts as a UK SME — micro, small, medium — and why the definition matters for lender Consumer-Duty scope.
The unhelpful answer
There is no single UK SME definition. The threshold depends on the statute applying — Companies Act, FCA Handbook, EU Recommendation, HMRC for tax, BEIS for statistics. Most refer to a similar 250-employee ceiling but differ on turnover, balance sheet, and which mix matters.
The Companies Act 2006 definition (most-used)
Sections 382, 384A and 465 of the Companies Act 2006 set the working definition. A company falls into a category if it does not exceed at least two of the three thresholds in the table below.
| Category | Annual turnover | Balance sheet total | Average employees |
|---|---|---|---|
| Micro-entity | ≤ £632,000 | ≤ £316,000 | ≤ 10 |
| Small | ≤ £10.2M | ≤ £5.1M | ≤ 50 |
| Medium | ≤ £36M | ≤ £18M | ≤ 250 |
| Large | > £36M | > £18M | > 250 |
To qualify as a small company a business must also have qualified in the prior year (with limited transitional exceptions).
How Companies House reflects this
The size category drives which accounts a company files. On a company's profile page, the "Last accounts" entry tells you:
- Micro-entity accounts → micro
- Small accounts → small (also "abbreviated accounts" historically)
- Medium-sized accounts → medium
- Full accounts → medium or large (full disclosure used)
- Group accounts → consolidated; typically larger groups
- Dormant accounts → no significant transactions in the period
This is the most reliable size proxy in free Companies House data. Companies House does not publish exact turnover or headcount for small/micro companies (statutory privacy carve-out under the Companies Act); the accounts-category field is the cleanest signal you'll get.
Why the definition matters for lenders
FCA Consumer Duty scope
FCA Consumer Duty (full force from July 2024 for existing products) applies to sole traders and to micro-enterprises — defined as fewer than 10 employees AND turnover under £2M — where the lender's product is FCA-regulated. Small and medium SMEs are outside the direct scope, though the FCA expects analogous good-conduct principles. See our Consumer Duty post for the operational impact.
FCA loan-amount perimeter
Most unsecured business loans to UK SMEs over £25,000 sit outside the FCA's regulated activities. Loans under £25,000 to sole traders or partnerships of three or fewer individuals are typically regulated. This intersects with the SME category — a £15,000 working-capital loan to a small Ltd is unregulated, but the same loan to a sole trader is regulated.
Product fit
Different SME categories support different lending products:
- Micro — small unsecured loans £5k–£50k; merchant cash advances; revenue-based; some asset finance
- Small — working capital £25k–£250k; invoice finance; asset finance; some commercial mortgages
- Medium — £100k–£5M structured facilities; cashflow loans; asset-backed lending; complex factoring
How many UK SMEs are there?
Department for Business statistics (2025 update):
- ~5.5 million UK businesses total
- ~5.3 million are SMEs by the Companies Act definition
- ~4 million are sole traders / partnerships without employees
- ~1.3 million employ at least one person
- ~47,000 new UK companies incorporate each month (most start as micro-entities)
Related
- Companies House — where you read the category from
- ICP — encoding SME category into your filter
- FCA-regulated lender
- FCA Consumer Duty and SME lending in 2026
Frequently asked
What is the legal definition of a UK SME?
Most-used set is the Companies Act 2006 (s.382, s.384A, s.465). Micro: ≤£632k turnover, ≤£316k balance sheet, ≤10 employees. Small: ≤£10.2M / ≤£5.1M / ≤50. Medium: ≤£36M / ≤£18M / ≤250. Company must not exceed at least two of the three to qualify.
Where do you find the SME category on Companies House?
On the company profile under 'Last accounts' — micro-entity / small / medium / full / group / dormant. Most reliable free size proxy available.
Does FCA Consumer Duty apply to all UK SMEs?
No. Applies to sole traders and to micro-enterprises (under 10 employees and £2M turnover) where the lender's product is FCA-regulated. Small and medium SMEs are outside direct scope, but FCA expects analogous good-conduct principles.
How many UK SMEs are there?
~5.5 million UK businesses, ~5.3 million are SMEs. ~4M are sole traders without employees; ~1.3M employ at least one person; ~47,000 new UK companies incorporate each month.