The UK’s business landscape is made up of 5.7 million enterprises, within which there are over 1.1 million micro-businesses (that is, businesses employing fewer than 10 staff).
Throw sole traders into the barrel as well, though, and that figure’s over 5.4 million...
It's clear that micro-businesses (or micro-enterprises) make up a huge slice of the UK’s business population. They play a vital role in the economy and in people’s daily lives.
It’s worth getting under the skin of what makes a business a micro-business in the UK. Given a closer look, they reveal some interesting trends.
Just started a business? Don’t forget about your insurance. Take a look at how we can support you with guidance and advice on what you may need.
What is a micro-business?
Let’s start by defining exactly what a micro-business is. According to HMRC, for a business to be registered with Companies House as a ‘micro-entity’ (their official term for a micro-business or micro-enterprise), it must meet at least two of the following criteria:
- fewer than 10 employees
- a maximum turnover of £1 million
- £500,000 or less on its balance sheet.
Obviously, HMRC has to draw a firm line between micro-businesses and small businesses for tax and accounting purposes. So its definition of a micro-business is bound to be prescriptive.
However, micro-business definitions can and do vary. Citizens Advice, for example, set the maximum turnover for a micro-business at £2 million.
Energy companies have their own criteria, too, set by Ofgem. To qualify as a micro-business, you can’t use more than: 100,000 kilowatt hours (kWh) of electricity and 293,000 kWh of gas per year.
Some stats reports will also treat sole traders as separate entities while others include them in small business or micro-business categories. (The best, of course, will show you both.)
The UK's micro-business landscape at a glance
- The UK has 5.7 million businesses, 1.15 million of which are micro-businesses employing fewer than 10 employees.
- Small businesses (including micro-businesses) are the largest group in terms of size (5.64 million). They make up 99.17% of the UK's businesses.
- The second-largest group are 'non-employing businesses' (ie sole traders) of which there are 4.27 million. This is followed by medium-sized businesses (38,435) and large businesses (8,335).
- If you count both sole traders and micro-businesses with employees, the UK has 5.4 million micro-businesses in total.
- Micro-businesses provide employment for 31% of the UK's workforce.
How many micro-businesses are there in the UK?
At the start of 2026, the UK’s total business population was 5.7 million. Of those, 5.64 million were small (0-49 employees), 38,435 were medium-sized (50-249 employees), and 8,335 were large businesses (250+ employees).
According to those stats, small businesses (including micro-businesses) make up 99.17% of all UK businesses.
However, separate 'micro' from 'small' and it becomes clear that micro-businesses outnumber larger small businesses by a wide margin. Then, the UK has around 1.15 million micro-businesses and only 220,000 small businesses.
Throw sole traders (AKA ‘non-employing businesses’) into the mix and things get even more interesting. As there are over 4.27 million sole traders in the UK, this puts the total number of micro-businesses at over 5.4 million.
Small difference?
There’s a temptation to think of micro-businesses and small businesses as being little and the same. Especially when you see them grouped together with small businesses in stats reports. Or even SMEs (small-to-medium enterprises).
Beyond the headline stats, though, there are some crucial differences between micro-businesses and small businesses which may influence how they operate and the kind of resources and support they need.
What's the difference between a small business and micro-business?
To prevent confusion between larger small businesses and micro-businesses, it’s worth referring back to HMRC. By their reckoning, for a business to be classified as a ‘small business’, they must have at least two of the following:
- 50 employees or less
- a maximum turnover of £15 million
- £7.5 million or less on its balance sheet.
Clearly, ‘small' businesses aren’t all that small. Especially when compared with micro-businesses...a property law firm, for example, might employ only four staff members yet generate enough revenue to be registered as a small business.
In the same way, an up-and-coming pasta box subscription start-up can’t call itself a small business simply because it employs more than 10 people. As far as HMRC’s concerned, it’s a micro-business until it turns over £1 million or has assets on its balance sheet worth over £7.5 million.
Are sole traders and freelancers classed as micro-businesses?
Ultimately, the differences between larger small businesses and micro-businesses stretch beyond company size, turnover, and assets.
They play very different roles in the UK’s business landscape. Both in terms of structure and in the services they offer.
When it comes to different types of businesses, there’s plenty of variation within the micro-business community. Especially if you count freelancers, sole traders, and side hustlers within that demographic as well.
For example, a micro-business could be a marketing consultant who’s left their firm to go it alone. Or a café that employs eight members of staff.
What about SMEs?
According to most stats reports, an SME (small-to-medium enterprise) can have anywhere between 1-249 employees. Which technically means all micro-businesses are SMEs too.
SMEs are a broad but important category when examining the UK’s business landscape. The stats speak for themselves: 99.9% of all UK businesses are SMEs. They generate 51.2% (£2.8 trillion) of the UK’s total business turnover and account for 60% of its employment.
What's the average turnover for a UK micro-business ?
First, let’s look at the average turnover for a business of any size in the UK. In 2025, the average UK business earned £970,897. The turnover was 75% higher in London, at £1.7 million.
Per worker, this works out to an average turnover of £196,411. Or £296,000 for those working in London.
However, the total turnover of all UK businesses was £5.5 trillion. Small businesses contributed 14% to that pot, micro-businesses 12.7%, and sole traders 7.3%.
The biggest contributors were large businesses, representing just 0.15% of businesses but generating 48.8% of the UK's business turnover.
Growth and trends in UK businesses
It's worth noting that, in terms of numbers, micro-businesses that employ staff have declined slightly since their peak. In 2022, there were 1.19 million. This has slightly dropped to 1.15 million.
Nobody knows exactly what's in store for the UK's micro-businesses. But when micro-business owners were asked what their expectations for the following year were, over half (53.6%) expected their turnover to stay the same. Meanwhile, 15% expected it to increase and 15.5% to decrease.
This is a slightly worse outlook than our last update in 2024, where over 17% of micro-business owners expected their turnover to increase. But, this could be due to economic impacts, such as cost of living rises and the increase in employer national insurance contributions.
Taking care of (micro)business
We're here to protect micro-businesses from all manners of risks and are happy to offer our advice. If you're not sure how to go about insuring your micro-business, you can have a read through our guide to the different types of insurance small businesses need.
We’ve also produced a bunch of other resources for micro-businesses, like our guide on hiring your first employee.
Otherwise, give us a call on 0345 222 5391 and one of our friendly advisers will help you out.
Image used under license from Shutterstock.
micro-businesssmall businessstatistics