Understanding the 2025 Amendments to Local Audit Regulations

In a recent move, the UK government has updated the regulations governing local audits, particularly focusing on what constitutes a "major local audit." The changes come into effect on August 17, 2025, and are applicable to England and Wales. Here's what you need to know:

What's Changed?

The key amendment concerns the financial threshold that determines when an audit is classified as a "major local audit." Previously, for audits concerning financial years starting on or before April 1, 2024, the threshold was set at £500 million. This means that if a local authority's total income or expenditure exceeded this amount, it would be subject to a major audit.

However, starting from financial years beginning on or after April 1, 2025, this threshold has been increased significantly to £875 million. This change reflects adjustments for economic conditions and possibly aims to streamline the auditing process for smaller authorities, reducing their regulatory burden.

Why Does This Matter?

Classifying an audit as "major" comes with more stringent reporting and compliance requirements, which can affect how local authorities plan and allocate resources. By raising the threshold, the government is potentially reducing administrative overheads for smaller councils and focusing resources on larger entities where the stakes are higher.

Impact on Sectors

Despite these changes, the government anticipates no significant impact on the private, voluntary, or public sectors. This suggests that while the amendment adjusts the financial criteria, it is not expected to disrupt current operations significantly.

Conclusion

These amendments reflect the government's effort to update auditing standards in line with current financial realities, ensuring that major audits are reserved for larger financial entities. Local authorities should review these changes to understand how they may affect their financial reporting and audit obligations moving forward.