Accounting

What is Accounting Period?

Your accounting period is the 12-month timeframe your company uses for financial reporting and tax calculations.

Example

Most companies use 1 April - 31 March, or align with calendar year (1 Jan - 31 Dec).

Key Dates

First period can be up to 18 months; subsequent periods usually 12 months

How Accounting Period Works in Practice

Your accounting period (also called your financial year or accounting year) is the period for which your company prepares its financial statements and calculates its Corporation Tax. It is defined by your Accounting Reference Date (ARD), which is the last day of the month in which your company was incorporated. For example, if you incorporated on 15 July, your ARD is 31 July, and your first year end is 31 July of the following year.

The first accounting period is special because it can be extended up to 18 months from incorporation. Many directors choose to extend or shorten their first period to align with a preferred year end, such as 31 March (to align with the UK tax year end of 5 April) or 31 December (calendar year). You change your ARD by filing a form with Companies House.

Choosing your year end date has practical implications. A 31 March year end means your Corporation Tax payment falls on 1 January, which is straightforward to remember. It also aligns reasonably well with the personal tax year for salary and dividend planning. A 31 December year end aligns with the calendar year, which some find more intuitive, but your tax deadlines fall mid-year.

For Corporation Tax purposes, an accounting period cannot exceed 12 months. If your accounts cover a period longer than 12 months (such as your first extended period), HMRC splits it into two Corporation Tax accounting periods. This can affect which tax rates and allowances apply to each portion of profit.

Step by Step

When you incorporate, Companies House automatically sets your ARD to the last day of the month of incorporation. You can change this by filing form AA01 with Companies House. You can shorten the accounting period at any time, but you can only extend it once every five years (with some exceptions).

Each accounting period, you prepare financial statements covering that period, file them with Companies House within 9 months, file the CT600 with HMRC within 12 months, and pay Corporation Tax within 9 months and 1 day. These deadlines are all measured from the end of the accounting period.

If you change your year end, the transition period is either shorter or longer than 12 months. Shortening is simpler because there is no Corporation Tax complication. Extending beyond 12 months creates two Corporation Tax periods, which your accountant handles in the CT600 filing. Most directors choose a year end once and stick with it.

Practical Tips

Choose a year end that avoids your busiest trading period, so you and your accountant are not dealing with year-end work during peak business times
If you have not reviewed your ARD since incorporation, check whether a different year end would make tax planning or reporting easier
Set a timetable working back from your filing deadlines to ensure you start preparing year-end records at least a month before the period ends
If you change your year end, discuss the transition with your accountant first to understand any Corporation Tax implications of the shorter or longer period

Common Mistakes to Avoid

Not realising your ARD was automatically set by Companies House at incorporation and never reviewing whether a different year end would be more practical
Confusing the company's accounting period with the personal tax year (6 April to 5 April), which are separate and serve different purposes
Extending the first accounting period beyond 12 months without understanding that HMRC splits it into two Corporation Tax periods with potentially different rates
Missing the 9-month deadline for accounts filing because the director assumed the period was different from the actual ARD

Frequently Asked Questions

Can I change my company's year end?

Yes. File form AA01 with Companies House to change your Accounting Reference Date. You can shorten the period at any time, but you can only extend it once every five years unless it is a new company's first period, the company is in administration, or Companies House grants special permission.

What is the best year end for a UK company?

The most common choices are 31 March (close to the personal tax year, Corporation Tax due on 1 January) and 31 December (calendar year). 31 March is popular because it simplifies salary and dividend planning across the personal tax year. The best choice depends on your business seasonality and cash flow.

How long is the first accounting period?

Your first accounting period runs from incorporation to your Accounting Reference Date, which can be up to 18 months. Many directors adjust the ARD to create a convenient year end. If the first period exceeds 12 months, HMRC splits it into two Corporation Tax accounting periods.

What is the difference between the accounting period and the tax year?

The accounting period is your company's financial year, defined by your Accounting Reference Date. The tax year (6 April to 5 April) applies to personal taxes like Income Tax and is used for Self Assessment. They are independent of each other, though many companies choose a 31 March year end to align them roughly.

Source: HMRC CTM01410 - Corporation Tax Manual: Accounting Periods

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