What is an accounting year?
Definition of an accounting year
An accounting year is the year covered by your business's accounts. Every business must prepare accounts for a year at a time.
Accounting years for different business types
If you're a sole trader, the easiest accounting year end for you is 5th April, to match the tax year end, or 31st March, which HMRC treat as matching the tax year end.
If you run your business through a limited company, Companies House will set your accounting year end as a year after the end of the month in which you created ('incorporated') the company.
You may wish to change your company's accounting year end to match the calendar year (31st December) or the financial year (31st March).
Disclaimer: The content included in this glossary is based on our understanding of tax law at the time of publication. It may be subject to change and may not be applicable to your circumstances, so should not be relied upon. You are responsible for complying with tax law and should seek independent advice if you require further information about the content included in this glossary. If you don't have an accountant, take a look at our directory to find a FreeAgent Practice Partner based in your local area.
Frequently Asked Questions
Why is it easier to have my accounts match the tax or financial year end?
Tax reliefs such as capital allowances often change at the tax or financial year end, so you could save time on calculations by choosing the tax or financial year end for your accounts.