Making Tax Digital is a bold initiative, which has come from a practical need to improve the accuracy of people’s individual tax affairs, while effectively signalling the end of the...
If you’re not in business, a year is a pretty straightforward concept. It starts in January and ends in December. There are various landmarks and events throughout, some public, some personal. It’s also defined by seasons, holidays and the beginning and ending of school, college and university term-times throughout.
The financial year is different, however, for several reasons. Firstly, there isn’t just one. There is your own financial or accounting year, which can start on any date you choose. Then there’s the fiscal, or tax year, which begins 6 April, unless you have a limited company, in which case it’s 1 April.
Secondly, the key calendar dates in a financial year, whether for your accounts or for tax purposes, aren’t like those on the normal calendar.
For example, every company must prepare accounts that report on its activities, including its performance, for the preceding financial year. For all new companies, the first date for this should fall on the last day of the month of its first anniversary.
Then there are certain dates in the tax year that are deadlines for self assessment tax returns and payments, such as 31 January (for the first payment of tax on account) and 5 October (the date by which you must have notified HMRC of any income that’s not been taxed).
Yes, it sounds complicated, but we’ll take you through it. We’re specialists in business accounting services in Lancashire and it’s our job to make it easy for you to understand how the financial year works.
Financial Year End for a Limited Companies
The government’s financial year runs from 1 April to 31 March. If there are going to be any changes to tax rates or rules, then typically they’ll start 1 April.
However, your company’s accounting year end is the date you choose to prepare your accounts. Many companies choose the same dates as the financial year, just to keep things simple, but you don’t have to follow this.
Whichever date you choose to for your accounting year end will then affect the dates you must pay your tax on.
You should plan your accounting year end, because you also must prepare quarterly VAT returns, so if your payment due date for your tax coincides with a VAT return your cash flow might take a big hit.
Financial Year Deadlines for Companies
As a limited company, you must file your accounts annually with Companies House and you mustcomplete a Company Tax Return.
But when should you file accounts with Companies House? These calendar deadlines are different.
You must file your first accounts with Companies House 21 months after the date you registered your company there.
After that, it’s nine months after your company’s financial year ends.
You must file your Company Tax Return 12 months after your accounting period ends.
You must pay your Corporation Tax, or inform HMRC that you don’t owe any, nine months and one day after your accounting period ends.
Financial Year End for Sole Traders or Partnerships
The fiscal or tax year runs from 6 April to 5 April the following year. As with limited companies, you can choose to make your own accounting year end coincide with these dates, or you can choose a different date. If you choose 31 March, HMRC will still treat this as being the same as the tax or fiscal year end.
Matching the tax year does mean that you won’t pay tax twice on the same profits when you first start trading – this is known as overlap profits, where your business year end doesn’t match the tax year end.
Under basis period guidelines, you always pay tax on the profits of the accounting year that ends within the tax year.
It’s important that you ensure you report the correct profits for the period covered.
Financial Deadlines for Sole Traders or Partnerships
If you’re self-employed but not a limited company you come within the self assessment system. This is the process by which you let HMRC know your income, profits and expenses for the tax year within which your accounting year end falls.
You must complete a tax return that calculates your tax liability to meet certain deadlines.
On 31 January, during the tax year, your first payment on account is due. This is money you pay towards your tax bill for the following year end. This payment will only apply if you’ve earned a certain amount of income.
31 July is the date when your second tax payment on account is due.
By 5 October you must notify HMRC of income you have that has not been taxed before you received it, or any capital gains over £11,300.
You must submit a paper tax return by 31 October. For online returns, it’s 30 December if you owe less than £30,000 and you want tax deducted through your tax code. Otherwise, the final deadline for tax returns is 31 January.
If you discover any errors or omissions, you have 12 months after 31 January to amend the return following the end of the tax year.
Penalties for failing to meet fiscal deadlines
For limited companies and sole traders or partnerships, there are penalties if you miss official deadlines for filing returns. You can also face penalties for failing to keep adequate business records.
We’re here to help, because we know that this paperwork, and the various dates involved, can seem daunting, and distracting when you’ve got a business to run.
We can offer expert advice, support and guidance with all aspects of the financial calendar and your obligations, while keeping a clear eye on the future, to help you plan ahead for your business objectives.
Get In Touch
For business accounting services in Burnley, Lancashire and throughout the North West, please get in touch. We’re ready to talk to you. Give us a call on 01282 902456, email email@example.com or visit the contact page on our website and fill in the contact form – we’ll reply as soon as we can.