As year-end approaches (again), it’s a good idea to set aside some time to get your business ducks in a row.

In the UK, the fiscal year, or ‘tax year’, runs from the 1st April one year to the 31st March the following year. And, in its most basic form, it’s the 12-month accounting period used by the government for accounting and budget purposes. Even though many companies have worked by these dates historically, a large number also used a calendar year ending 31st December.

Completing year-end reporting is a legal requirement. It gives a definitive overview of how your business has performed over the past 12 months. The information you include needs to be accurate as it is not only the basis upon which your corporation tax is calculated,
it is also a summary for shareholders, potential investors, banks and other lenders. It is an indication of the financial stability of your business. While you are reporting and assessing previous performance, it is also a good opportunity to carry out some forward planning and forecasting for the future; including looking at your business plan and cash flow forecast.

What’s in the date?

You can choose when your company’s financial year starts. But, because personal taxable income is calculated on a 6th April to 5th April basis, a larger number of smaller businesses opt for an accounting year that runs for the same period. This is mainly because a full set of up-to-date accounts are needed to substantiate your annual tax return and there’s nothing like killing all your accounting birds with one stone. However, over the years, there’s been a big shift to moving financial year ends away from this date, with most businesses choosing the month ending 12 months after their incorporation.

Making it easier

The key to a smooth and stress-free year-end is in the preparation. It can be one long, onerous task that feels relentless – especially if you’re a small business owner with 12 months’ worth of receipts in a carrier bag! Having an organised book-keeper on board can significantly help matters. But, either way, the only place to start is to get your financial information in order and your accounting records up to date.

The legalities

Limited companies have the following annual tax responsibilities:

• Submission of an annual return, including Persons of Significant Control, to Companies House
• Submission of a set of statutory accounts to Companies House
• Submission of a company tax return to HMRC
• Registration for VAT if turnover is expected to exceed £83,000 in a rolling 12-month period

There are also other considerations including PAYE and CIS that are due throughout the year.

But the good news is that these tasks are getting less laborious with the help of cloud-based accounting. It’s a growing trend with more people taking the leap and managing their finances online; and they’re seeing the benefits too. It’s cost-effective, saves you time, is accessible anywhere, keeps your data secure and can often be integrated with other business management platforms. You can even submit some returns, like VAT and PAYE, online too.

But you will need to do your research as there are a lot of options out there, from simple book-keeping to full-service accounting. Different packages are aimed at different sized businesses, so you need to choose the capability and functionality to suit your needs. And where possible, select a plan which offers a monthly subscription. This means you’ll always have full access to your data without incurring costs for upgrades or latest versions.

Don’t underestimate the human touch

The majority of businesses will still work with an accountant, and a good one is worth their weight in gold when it comes to the year-end black hole. As well as compiling your annual return and accounts, they can also complete your corporation tax return. This is a tax applied to all businesses in relation to company profits and is currently charged at 19% on all profit generated within the year.

The profits that are applicable to corporation tax include the money your company has made from simply doing business (trading profits), investing and selling assets for more than they cost (chargeable gains).

But you won’t receive a bill for your corporation tax so be sure not to miss the payment deadlines. The general rule of thumb is that payment will be due within nine months and one day of the end of the accounting period. If you fit with the standard fiscal year of 1st April to 31st March, payment of tax is no later than the 31st January the following year.

Get the help you need

Even though it’s an annual occurrence, the year-end looms and causes havoc among small businesses every time. So, the best advice is to work with a good accountant. This not only takes the weight off your shoulders (and allows you to get on with the job of running your business) but also makes it work in progress throughout the year rather than a mad cram at the end.

Your business is responsible for its own finances and they should be separate to your own. Once all taxes are paid, the profits belong to your business. So, it really is in your best interest to invest the time (and money) into keeping your financial records up-to-date and abiding by the rules set out by the government.

In any case, a financial year-end is also a good opportunity to review the performance of your business to date and set future plans for the following year. Are you looking to grow your business, expand your team or move to new premises? Is there work that you can do to make your finances go further? How can you get your money working harder for you? Are you likely to face any cash flow shortfalls in the coming 12 months?