The Facebook Live for June 2026 talked about the pros and cons of aligning the accounting year with the tax year, versus choosing a different date. It covered the implications for tax payment deadlines, workload management, and industry seasonality, helping business owners make a strategic choice for their business.
What is a Year-End?
The year-end is the date your formal accounting period finishes. This is the date that you would “close the books” and prepare your annual accounts and tax returns based on the 12 months of your financial year.
The “Standard” Year-End
For sole traders, the tax year runs from 6th of April to 5th of April. For simplicity, most businesses use a 31st March year-end, meaning their tax year runs from 1st of April to 31st of March. This is called the “tax year basis”.
For new limited companies, the default year-end is the end of the month one year after they were incorporated. For example, if you set up a limited company on June 12th, 2026, then your first financial year will cover from June 12th, 2026 to June 30th, 2026. However, the following years will have a financial year from July 1st to June 30th.
Why choose a different year-end?
There are a number of reasons that you might want to choose a different year-end for your business.
- Seasonality: If you run a seasonal business (i.e. weddings, Christmas retail), it makes sense to end your year after your busiest period. This gives a truer picture of a full season’s trading and means you aren’t doing accounts during your peak time.
- Workload Management: Ending your financial year in a quieter month gives you more time to focus on the accounts.
- Stocktaking: It might be easier to perform a stocktake when inventory levels are naturally at their lowest.
The Implications of Choosing a Different Date
If you do decide to choose a different year-end date for your financial year, you need to be aware of the implications.
For sole traders, it used to be very complicated if you changed your year-end so that it was different to the standard year-end due to overlapping profits. However, due to “Basis Period Reform”, which was announced back in 2022 and brought into effect from the 2023/2024 tax year, this is changing, and by now, most sole traders will have their financial year-end aligned with the tax year. The main point is that for sole traders, sticking to March 31st as your year-end is now almost always the simplest option. If you do not stick to the March 31st or April 5th year-end, then you will need to manually apportion and calculate your profits for the tax year every time you file.
It is completely different for limited companies. They have complete flexibility over their tax year-end date. They can choose to keep their year-end as per their incorporation date, or they can file an AA01 form with Companies House to change their accounting period to a different one. The main implication is that your Corporation Tax is due 9 months and 1 day after your year-end.
How do you set or change your year-end?
If you are a limited company, you can shorten your accounting period as often as you like or lengthen it (up to 18 months) once every 5 years by filing an AA01 form with Companies House. However, if your accounts are already overdue, you cannot change the date. The request to change must be applied for before the current filing deadline expires. Once you have filed the AA01 form, you will need to notify HMRC of the change before your original Corporation Tax return filing deadline. If the change in your accounting period means it will exceed 12 months, you will need to file two corporation tax returns.
If you are a sole trader, you would prepare your accounts to the new date, and when you submit your self-assessment tax return, you update the dates in the accounting period boxes on the tax return, as long as your tax return is submitted on time.
Your year-end date is a strategic decision, not just an administrative one. If you’re setting up a new limited company or feel your current year-end isn’t working for your business cycle, just contact me, and we can have a chat about the implications of changing it.