Your year-end date is significant, not only affecting when you need to submit your accounts but – most importantly – determining your deadline for paying your tax.
So if paying your corporation tax in January puts a strain on your accounts, why not change it to a date that better suits your business? You are not only entitled to change it, but it’s not difficult to do. With careful and informed planning you can ensure that your business isn’t hit with a tax bill at the worst possible time.
What you need to know:
- The accounting period for corporation tax purposes cannot exceed 12 months so if your accounts with Companies House cover a period longer than this you will need to file 2 returns.
- Extending your end date and spreading your profit over 2 periods may be beneficial if you are seeing reduced profits, as corporation tax periods can be split on a time-apportioned basis. This way you can avoid paying a hefty tax bill based only on one particularly profitable year.
- While you are entitled to adjust your accounting period, beware – you can change your year-end as many times as you like if shortening, but can only change it once in 5 years when extending.
- Your latest filing date is when your accounts must be received. File them late and expect to be hit with a financial penalty. Corporation tax is then payable 9 months and 1 day after the end of the tax period.
So how do you choose the right end date for your accounts? Ultimately it comes down to recognising what your priorities are for your business:
- Your books need to look good – if your accounts need to be as high as possible (for instance when applying for finance), then your end date should come at the end of your most profitable month.
- You want to deal with all tax accounts simultaneously – if this is appealing then it makes sense to have your end date as 31st March in order to tackle income, corporation and PAYE all in one go.
- You don’t like planning too far ahead – does your accounting deadline fall during a public holiday? If your end date is 31st March, you need to factor in longer lead time to ensure tax payments are received by your December 31st deadline.
- You need to consider cash flow – for example, if your business is seasonal. Remember that corporation tax is payable 9 months and 1 day after your accounting period ends – so if this date falls at the end of your low season you could be stung by a big tax bill when you are least prepared for it.
If you’d like to talk to someone about your company accounts, and how your end date affects the way you pay your corporation tax, get in touch with us today for a no-obligation, no-cost chat – we’d be happy to offer our advice.
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