What year end should I have?
Whether you have just started up a business or have been going a number of years there are a few factors which will influence what year end you choose:
- Date registered at Companies House: The default date chosen is the end of the month one year from incorporation, so if you incorporated on 4 February 2010, your year end would automatically be 28 February 2011. You can however change this.
- If you did not start trading through the business until May, you may want to change the year end to April so it represents a full years trade
- If you started on 4 February you might consider that your first year ended on 31 January and change it accordingly
- If you are involved in seasonal work (eg tourism) it would probably be easiest to have your year end in the off-season so that you have more time to complete the year end and also fewer transactions to split between the years
- If you have a year end which is not 31 March you have the ability to vote dividends in the most tax efficient way between the accounting years
There are some rules which limit how often you can change your year end and the maximum length:
- you may not extend a period so that it lasts more than 18 months
- you may not extend more than once in 5 years
- you may shorten an accounting reference period as often as you like
- full details available at Companies House
In reality therefore there are a number of reasons why your year end may not be the same as the tax year although at first sight this might seem the logical choice. The notes above refer to Limited companies and while most sole traders and partnerships have March year ends some of the considerations are the same.
We hope you find the contents of this blog useful; you should of course always seek professional advice for your specific needs. Alastair Wood, AW Accounting – Accountants who “speak your language”
