What is a directors' report, and who needs one?

What a directors' report is

Every limited company prepares statutory accounts at the end of each financial year. The numbers sit in the balance sheet, the profit and loss account and the notes. The directors' report is the part written in words. It is the board's own statement about the year, signed on its behalf.

The duty comes from the Companies Act 2006. Section 415 says the directors of a company must prepare a directors' report for each financial year. It is not a tax form, and HMRC does not ask for it on its own. It forms part of the full accounts that go to the company's members, and to HMRC with the Company Tax Return.

If you want to see how the accounts and the tax return differ, read our guide to the company tax return vs company accounts. For the wider picture of what happens after the year closes, see year end accounts explained.

Who has to prepare one

The answer depends on the size of the company. Size is tested against three measures: turnover, balance sheet total and average number of employees. A company is in a size band if it meets at least 2 of the 3 conditions.

• Micro-entity. Turnover of £1 million or less, £500,000 or less on the balance sheet, and 10 employees or fewer. A company that qualifies as a micro-entity does not have to prepare a directors' report.
• Small company. Turnover of £15 million or less, £7.5 million or less on the balance sheet, and 50 employees or fewer. A small company must prepare a directors' report for its members, but can choose not to file it at Companies House.
• Medium-sized company. Turnover of no more than £54 million, a balance sheet total of no more than £27 million, and no more than 250 employees on average. The report must be prepared and filed with the accounts.
• Large companies. Anything bigger must prepare and file a full directors' report, with more disclosures than smaller companies.

Remember that only 2 of the 3 conditions need to be met in each band. A company with 12 staff could still be a micro-entity if its turnover and balance sheet are both under the limits.

Dormant companies

Companies House guidance says dormant company accounts do not need to include a profit and loss account or a directors' report. If you are not sure whether your company counts as dormant, our guide to dormant vs non-trading companies explains the difference.

Prepare vs file: the part that confuses people

Two separate duties get mixed up. Preparing the report means writing it, having the board approve it and getting it signed. Filing it means sending a copy to Companies House, where it goes on the public register.

• Micro-entities need neither. They can prepare and file a balance sheet with less information.
• Small companies must prepare the report, but do not currently have to deliver a copy to Companies House. Many choose to keep it off the public record.
• Medium and large companies must prepare and file it.

So a small company director who has never seen a directors' report on the register may still be expected to have one. It goes to shareholders with the full accounts, and the full accounts go to HMRC too.

What goes in a small company's report

For a small company, the legal minimum is short. Under the Companies Act and the small company regulations, the report must include:

• Directors' names. Everyone who was a director at any time during the financial year, including anyone who joined or left part way through.
• Political donations. If the company gave political donations or incurred political expenditure of more than £2,000 in total during the year, the recipients and amounts must be shown. Contributions to political parties outside the UK must also be disclosed.
• The small companies statement. If the directors use the small companies exemption, the report must say so in a prominent position above the signature.

A small company does not have to state a recommended dividend. Larger companies must state the dividend the directors recommend, and they face further disclosures set by regulations.

If the company has its accounts audited, the report must also include a statement from the directors. It says that, as far as each director knows, there is no relevant audit information the auditor is unaware of, and that each has taken the steps they should to find out. Companies that take the audit exemption leave this out.

A hypothetical example

Approving and signing the report

The board of directors must approve the report. A director or the company secretary then signs it on behalf of the board, and their name is printed with the signature.

The law treats this seriously. If a report that does not comply is approved, any director who knew it did not comply, or was reckless about it, and failed to take reasonable steps to prevent approval, commits an offence. The penalty is a fine.

Deadlines and late filing

There is no separate deadline for the directors' report. It travels with the accounts. A private company must file its annual accounts with Companies House within 9 months of its accounting reference date. A public company has 6 months. A company's first accounts are due within 21 months of incorporation for a private company, or 18 months for a public company.

If your accounting period ends on 31 March 2026, the accounts are due by 31 December 2026. Companies House says the deadline still applies if it falls on a Sunday or a bank holiday.

Late filing penalties for a private limited company are:

• Up to 1 month late: £150
• 1 to 3 months late: £375
• 3 to 6 months late: £750
• More than 6 months late: £1,500

The penalty is doubled if the accounts are late 2 years in a row.

Changes on the way

Company reporting rules are changing, so check the position each year.

• Directors' report under review. Companies House guidance says that, as announced on 21 October 2025, the government is preparing legislative changes to remove the requirement for all companies to produce a directors' report. As at the date of this guide, no start date has been confirmed, so the current rules still apply.
• Profit and loss account. From 1 April 2028, small companies and micro-entities will have to deliver a copy of the profit and loss account to Companies House. Both will be able to opt out of publishing it on the public register.
• Abridged accounts and software. From 1 April 2028, companies will no longer be able to file abridged accounts, and accounts will only be filed using commercial software.

Where bookkeeping comes in

A directors' report is only as reliable as the records behind it. To decide whether the company is micro, small or medium, you need an accurate turnover figure, a correct balance sheet and a true headcount. To list political donations, you need payments coded to the right accounts during the year, not guessed at afterwards.

Books kept up to date through the year make year end quicker. The accountant can start on the accounts as soon as the period closes, rather than first untangling months of unreconciled bank lines. Our page on bookkeeping for limited companies explains what a well-run set of company books looks like. If you need a term explained, see the glossary.