Is it Possible to Change Your Company’s Year End?

As a business owner, you have the flexibility to choose your company's financial year-end date, which initially aligns with the national tax year from 6th April to 5th April. However, you can change this date to better suit your business needs. At Peace Of Mind, we understand the importance of this decision and are here to guide you through the process. Let's explore the concept of the financial year-end and the considerations involved in making this crucial choice for your business.

Understanding the Financial Year-End:

The financial year-end, also known as the accounting period or tax year, refers to a 12-month period when your company's financial records are consolidated. By default, HMRC sets this period to end on 5th April each year, coinciding with the UK tax year. When you register your business for corporation tax, HMRC issues a Unique Taxpayer Reference (UTR), and your financial year-end is automatically set to the default date.

Determining Your Financial Year-End:

Unless you actively change your company's financial year-end, it will remain aligned with the default tax year, ending on the 5th of April each year. However, you are free to select a different date based on your business requirements. Before making a decision, it's essential to consider several factors that can influence your company's financial management and tax obligations.

Factors to Consider When Choosing Your Financial Year-End:

1.Tax Payment Schedule:

The financial year-end date directly impacts when your corporation tax payment is due. HMRC requires companies to pay corporation tax nine months and one day after their financial year-end date. By strategically setting your year-end, you can manage your tax liabilities more effectively.

2. Benefits of Changing Year-End:

Opting for an earlier year-end can shorten your accounting period, potentially reducing your profit and, consequently, the amount of corporation tax payable. Conversely, extending the year-end grants you extra time to prepare for your tax obligations. This flexibility can be beneficial for startups gradually increasing their profits.

3. Deferring Tax Liability:

Changing your accounting period can help you legitimately defer tax liability. By pushing back the tax due date when your profits are decreasing, you can manage your financial obligations more efficiently.

4. Avoiding Busy Trading Periods:

For businesses with seasonal operations, selecting a financial year-end that doesn't coincide with busy trading periods can streamline accounting processes and enhance operational efficiency.

5. Ideal Year-End Date for New Ventures:

For start-ups, it's common not to expect substantial profits within the first 12 months of trading. Setting an earlier year-end can help keep initial tax liabilities lower while allowing your business time to grow and adapt to financial responsibilities.

Confirming and Changing Your Year-End Date:

To verify your current financial year-end date, visit the government's Companies House website, enter your company name, and navigate to the 'Accounts' tab to find the information. If you decide to change your financial year-end, it's essential to be aware of the rules and limitations. Businesses can shorten their accounting periods as many times as needed, but extending it is possible only once every five years (with some exceptions). Exceptions include aligning the year-end with a parent or subsidiary company or obtaining special permissions from Companies House.

At Peace Of Mind, we understand the significance of your financial decisions, and our team of experienced small business advisers and accountants is here to assist you throughout the process of changing your financial year-end. We strive to ensure that your business's financial planning aligns with your goals and results in efficient tax management and growth.