SECR Compliance Requirements: Who Must Report in 2026?

If you're a finance director or compliance officer at a growing UK business, you've probably heard about SECR reporting requirements. But does your company actually need to comply? Understanding whether your business falls within the SECR mandatory reporting framework is critical to avoiding penalties and ensuring proper governance.

This comprehensive guide explains exactly who must report under SECR regulations in 2026, how the thresholds work, and what happens if your business crosses into compliance territory.

SECR Compliance Overview

Streamlined Energy and Carbon Reporting (SECR) became mandatory for qualifying UK businesses in April 2019. The framework requires certain companies and LLPs to disclose their energy consumption, greenhouse gas emissions, and energy efficiency actions annually as part of their Directors' Report filed with Companies House.

But SECR doesn't apply to every UK business. The regulations specifically target larger organizations while exempting smaller enterprises that lack the resources for comprehensive environmental reporting.

Let's break down exactly who must comply.

The Three Categories of SECR Compliance

SECR divides UK businesses into three distinct categories, each with different compliance obligations.

1. Quoted Companies

Definition: UK companies with equity shares admitted to trading on a regulated market (such as the London Stock Exchange Main Market, NYSE, or NASDAQ).

SECR Requirement: ALL quoted companies must comply with SECR, regardless of size or turnover.

Reporting Scope: Quoted companies must report on:

• UK energy consumption and emissions (mandatory)
• Global energy consumption and emissions (mandatory)
• Scope 1, 2, and 3 emissions where practical
• At least one intensity ratio

Key Point: If your company is listed on a major stock exchange, you must comply with SECR even if you're a micro-cap with minimal operations. There are no exemptions based on size thresholds for quoted companies.

2. Large Unquoted Companies

Definition: Private UK companies that exceed certain size thresholds but aren't publicly traded.

SECR Requirement: Your unquoted company must comply if it meets at least TWO of the following three criteria for two consecutive financial years:

Reporting Scope: Large unquoted companies must report on:

• UK and offshore energy consumption and emissions
• Scope 1 and 2 emissions (mandatory)
• Scope 3 emissions (recommended but not mandatory)
• At least one intensity ratio
• Energy efficiency measures taken during the period

Important: The two-year consecutive test means you need to exceed two thresholds in BOTH year 1 AND year 2 before SECR applies. A single year above thresholds doesn't trigger compliance.

3. Large LLPs (Limited Liability Partnerships)

Definition: UK Limited Liability Partnerships that exceed size thresholds.

SECR Requirement: Your LLP must comply if it meets at least TWO of the following three criteria for two consecutive financial years:

Reporting Scope: Same as large unquoted companies (UK and offshore energy and emissions, Scope 1 and 2, intensity ratios, and efficiency measures).

Key Difference: For LLPs, "gross assets" replaces "balance sheet total," and "members" replaces "employees" in the threshold tests.

Understanding the Threshold Tests in Detail

Let's examine each threshold criterion to help you determine your compliance status.

The £36 Million Turnover Test

What Counts as Turnover?

• Total revenue from ordinary business activities
• Excludes VAT and other taxes collected on behalf of third parties
• Includes both UK and international revenue
• Found on your profit and loss statement

Example: If your company generated £38 million in revenue in FY 2024 and £37 million in FY 2025, you pass the turnover test for both years.

Grey Area: Businesses close to the threshold should monitor turnover carefully. If you're at £34-38 million, small fluctuations could push you in or out of compliance territory.

The £18 Million Balance Sheet Test

What Counts as Balance Sheet Total?

• Total gross assets before liabilities
• Includes property, equipment, inventory, receivables, and cash
• Excludes intangible assets in some interpretations (consult your accountant)
• Found on your company balance sheet

Example: If your balance sheet shows total assets of £20 million in FY 2024 and £19 million in FY 2025, you pass the balance sheet test for both years.

Important Consideration: The balance sheet test can be volatile depending on acquisition timing, property revaluations, or major capital investments.

The 250 Employee Test

Who Counts as an Employee?

• Full-time and part-time employees
• Directors with employment contracts
• Calculated as average monthly headcount during the financial year
• Excludes contractors, freelancers, and consultants

Calculation Method:

Monthly employee count for each month of the year ÷ 12 = Average employees

Example: If your monthly headcount ranged from 245 to 265 throughout the year with an average of 252, you pass the employee test.

Key Point: The definition of "employee" follows standard accounting practices. If you're unsure whether someone counts, check how they're classified in your annual accounts.

The Two-Year Consecutive Test Explained

This is where SECR compliance gets nuanced. Simply exceeding two thresholds in a single year doesn't automatically trigger SECR obligations.

How It Works

You must meet at least two of the three thresholds in BOTH:

• The current financial year (Year 2), AND
• The immediately preceding financial year (Year 1)

Scenarios That Trigger Compliance

Scenario A: Clear Compliance

• Year 1: Turnover £38M, Balance Sheet £20M, Employees 180 (2 thresholds met)
• Year 2: Turnover £40M, Balance Sheet £22M, Employees 190 (2 thresholds met)
• Result: Must comply with SECR from Year 2 reporting

Scenario B: Growth Into Compliance

• Year 1: Turnover £37M, Balance Sheet £16M, Employees 260 (2 thresholds met)
• Year 2: Turnover £39M, Balance Sheet £17M, Employees 270 (2 thresholds met)
• Result: Must comply with SECR from Year 2 reporting (even though balance sheet stayed below £18M, turnover and employees exceeded thresholds both years)

Scenario C: No Compliance Required

• Year 1: Turnover £38M, Balance Sheet £16M, Employees 240 (only 1 threshold met)
• Year 2: Turnover £40M, Balance Sheet £20M, Employees 260 (3 thresholds met)
• Result: No SECR compliance required yet (didn't meet two thresholds in Year 1)

Scenario D: Falling Out of Compliance

• Year 1: Turnover £38M, Balance Sheet £20M, Employees 260 (3 thresholds met)
• Year 2: Turnover £34M, Balance Sheet £17M, Employees 245 (0 thresholds met)
• Result: Must still comply with SECR for Year 2 (because you met thresholds in Year 1), but potentially exempt from Year 3 onwards if thresholds remain unmet

When Does Reporting Start?

If you first meet the two-year test in your financial year ending 31 December 2025, your SECR disclosure must be included in the Directors' Report for that year, filed by September 2026 (for private companies) or June 2026 (for public companies).

Not sure if you meet the thresholds? Use our free SECR compliance checker to get an instant assessment based on your company data.

SECR Exemptions and Special Cases

Even if you meet the size thresholds, certain exemptions may apply.

Low Energy Use Exemption

If your UK energy consumption totals 40,000 kWh or less during the reporting period, you can claim a low energy use exemption.

What This Means:

• You must still include a statement in your Directors' Report
• The statement confirms you qualify for the low energy use exemption
• You don't need to provide detailed energy and emissions calculations

40,000 kWh Context:

• Roughly equivalent to 3-4 average UK homes' annual electricity use
• A small office of 200-300 square metres
• Minimal business vehicle use (mostly employee-owned vehicles)

Important: This exemption applies to UK energy only. If you have offshore operations, different rules may apply.

Offshore Exemption

If your company has no UK energy consumption (all operations are conducted outside the UK), you may qualify for an offshore exemption.

Requirements:

• Zero UK energy use during the reporting period
• All operations conducted from non-UK locations
• Must include an exemption statement in Directors' Report

Note: This is rare for most UK-incorporated companies, as even a small head office triggers UK energy consumption.

Subsidiary Exemptions

Certain subsidiaries may be exempt from SECR reporting if:

• They're included in a parent company's consolidated SECR report
• The parent company is subject to SECR or equivalent reporting requirements
• The subsidiary's accounts are included in the consolidated group accounts

Key Point: The parent company's SECR report must explicitly state which subsidiaries are included in the group reporting.

Group Company Considerations

For groups of companies, SECR compliance becomes more complex.

Parent Company Obligations

If your parent company meets the SECR thresholds:

• It must report consolidated energy and emissions for the entire group
• All subsidiary energy consumption and emissions must be included
• The consolidated report appears in the parent's Directors' Report

Individual Subsidiary Obligations

Individual subsidiaries must still comply with SECR if they:

• Independently meet the two-year threshold test
• Prepare their own Directors' Report (not consolidated)
• Have energy consumption not covered by parent's reporting

Practical Implications

Many groups adopt a centralized approach:

• Parent company collects energy data from all subsidiaries
• Consolidated SECR report covers the entire group
• Individual subsidiaries reference the parent's report in their own accounts

This reduces duplication while ensuring full compliance across the group structure.

What Happens When You First Meet SECR Thresholds?

If your business crosses into SECR compliance territory, here's what to expect:

Year 1: Baseline Establishment

In your first year of SECR reporting, you:

• Must include all required energy and emissions data
• Don't need to provide year-on-year comparative figures
• Establish your baseline for future comparisons
• Should set up robust data collection processes for ongoing compliance

Year 2 Onwards: Comparative Reporting

From your second SECR report onwards:

• Provide current year AND prior year comparative data
• Explain any significant year-on-year changes
• Track progress against intensity ratios
• Demonstrate continuous improvement in energy efficiency

Setting Up for Success

When you first trigger SECR obligations:

1. Implement monthly data collection: Don't wait until year-end to gather energy bills
2. Assign responsibility: Designate someone to own SECR compliance
3. Document methodology: Record your calculation approach for consistency
4. Consider automation: Evaluate whether SECR software could streamline compliance

Common Questions About SECR Compliance Requirements

Q: What if we only meet thresholds for one year?

If you meet two thresholds in only one financial year, you don't need to comply with SECR. The two-year consecutive test protects businesses from temporary threshold breaches due to one-off events or fluctuations.

Q: What if we exceed thresholds in Year 1, fall below in Year 2, then exceed again in Year 3?

• Year 1 + Year 2: If Year 2 falls below thresholds, you still must comply for Year 2 reporting (because Year 1 met thresholds)
• Year 2 + Year 3: If Year 2 was below and Year 3 exceeds thresholds, you don't comply for Year 3 (because Year 2 didn't meet thresholds)
• Year 3 + Year 4: If both exceed thresholds, you must comply from Year 4 onwards

Q: Do overseas revenues count toward the £36M turnover threshold?

Yes. Total company turnover includes both UK and international revenues. SECR thresholds are based on group-wide financial metrics, not just UK operations.

Q: Can we voluntarily report under SECR if we don't meet thresholds?

Absolutely. Many forward-thinking SMBs voluntarily adopt SECR reporting to:

• Demonstrate environmental commitment to customers and investors
• Prepare for future mandatory compliance as they grow
• Gain insights into energy costs and efficiency opportunities
• Meet supply chain sustainability requirements from larger customers

Q: What if our financial year straddled the April 2019 SECR introduction date?

SECR applies to financial years starting on or after 1 April 2019. If your year ended 31 March 2020 but started 1 April 2019, SECR applies. If your year started 1 January 2019 and ended 31 December 2019, SECR doesn't apply (but would apply to your 2020 financial year).

SECR Compliance Deadlines

Understanding whether you must comply is only half the battle. You also need to know WHEN to report.

Filing Deadlines

Your SECR disclosure must be included in your Directors' Report within your annual accounts:

• Private companies: 9 months after financial year end
• Public companies: 6 months after financial year end

Example Timeline

Financial year ends: 31 December 2025

Private Company:

• Deadline to file accounts (including SECR): 30 September 2026

Public Company:

• Deadline to file accounts (including SECR): 30 June 2026

Planning Timeline:

• January-February 2026: Collect and organize energy data
• March 2026: Calculate emissions using UK Government conversion factors
• April 2026: Draft SECR disclosure statement
• May 2026: Board approval and incorporation into Directors' Report
• June-September 2026: File with Companies House

For more details on compliance timelines, see our guide: SECR Reporting Deadlines: Your 2026 Compliance Calendar.

Penalties for Non-Compliance

If you meet SECR requirements but fail to comply, your business faces:

Companies House Penalties

• Late filing penalties: £150 to £7,500 depending on delay and company size
• Potential prosecution for persistent non-compliance
• Unlimited fines upon conviction

Reputational Damage

• Investor and shareholder concerns about governance
• Customer hesitation, especially from sustainability-focused buyers
• Employee attraction and retention challenges

Director Liability

Under the Companies Act 2006, directors can be held personally liable for ensuring accurate and complete Directors' Reports, including SECR disclosures.

How to Determine Your SECR Compliance Status

Follow this step-by-step process to assess your obligations:

Step 1: Identify Your Company Type

Are you a:

• Quoted company (publicly traded on regulated market)
• Unquoted company (private limited company)
• LLP (Limited Liability Partnership)

Step 2: Check Your Size Thresholds

For the past two financial years, extract from your accounts:

• Annual turnover
• Balance sheet total (or gross assets for LLPs)
• Average employee count (or member count for LLPs)

Step 3: Apply the Two-Year Test

For EACH of the past two years, determine how many thresholds you exceed:

• If 2 or more in BOTH years: SECR applies
• If fewer than 2 in either year: SECR doesn't apply (yet)

Step 4: Consider Exemptions

If SECR applies, check if you qualify for:

• Low energy use exemption (≤40,000 kWh UK consumption)
• Offshore exemption (zero UK energy consumption)
• Subsidiary exemption (included in parent's group report)

Step 5: Plan Your Compliance

If you must comply:

• Calculate your SECR reporting deadline
• Start collecting energy consumption data
• Choose your compliance approach (consultant, in-house, or automation)

Use our free compliance checker to work through these steps with personalized guidance based on your specific business situation.

Preparing for SECR Compliance

If you've determined that SECR applies to your business, start preparing now:

Immediate Actions

1. Gather energy bills: Collect 12 months of electricity, gas, and fuel invoices
2. Calculate baseline emissions: Use UK Government conversion factors to establish your current footprint
3. Choose an intensity ratio: Decide which metric best represents your business (per £M turnover, per employee, etc.)
4. Document efficiency actions: List any energy efficiency measures taken during the reporting period

Medium-Term Preparations

1. Establish data collection processes: Set up monthly or quarterly energy data gathering
2. Assign ownership: Designate someone responsible for SECR compliance
3. Select compliance approach: Evaluate consultants, software, or in-house capabilities
4. Review and improve: Identify energy efficiency opportunities to include in future reports

Long-Term Strategy

1. Integrate with sustainability goals: Align SECR reporting with broader ESG objectives
2. Engage stakeholders: Communicate energy performance to investors, customers, and employees
3. Plan for evolution: Prepare for potential Scope 3 and enhanced disclosure requirements
4. Leverage insights: Use SECR data to identify cost savings and efficiency improvements

For a comprehensive implementation guide, visit our complete SECR guide.

SECR Compliance Made Simple

Determining whether your business must comply with SECR is straightforward once you understand the thresholds and two-year test. If you meet two of the three criteria (£36M turnover, £18M balance sheet, 250 employees) for two consecutive years, SECR reporting becomes mandatory.

The key is to assess your status early, set up proper data collection systems, and ensure timely compliance to avoid penalties. With the right approach, SECR reporting becomes a valuable opportunity to understand your energy consumption, reduce costs, and demonstrate environmental responsibility.

Whether you're approaching compliance thresholds or already obligated to report, having a clear understanding of SECR requirements is essential for proper corporate governance in 2026 and beyond.

Ready to simplify your SECR compliance? Get started with Comply Carbon and generate your Companies House-ready report in minutes, with 100% accuracy guaranteed and £13,000+ in cost savings compared to traditional consultants.

Additional Resources:

• UK Government SECR Guidance
• Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013
• Companies House Filing Requirements
• What is SECR Reporting? Complete Guide