When is the best year end for my limited company?

As accountants we are often asked this. There is no single best choice for everyone, but these are the main factors to take into account.

Unless you really want your company accounting year end to coincide with your birthday or wedding anniversary, you will probably choose the last day of a month.

If your business is seasonal, having the year end just before your most profitable period can give you a cash flow advantage in postponing the payment of corporation tax on those profits.

If your priority is to show a strong balance sheet in your company accounts, to assist with raising finance, the company is likely to be in its best financial state shortly after your most profitable period. This would be a good time to draw up your annual balance sheet. For example, for a toy retailer, this might make 31 December a good choice.

31 December is often convenient, but if there is a lot of company accounting work to be done around the year end, this will need to be fitted in around the Christmas and New Year holidays. This is particularly the case with a year end stock take, which would need to be carried out as near to 31 December as possible.

The most popular choice is probably 31 March, as it fits in with the income tax, corporation tax and payroll tax years. This can make most tax and accounting matters slightly easier to deal with.

Due to the popularity of 31 March, accountants tend to be busier between June and December each year. You may find that you get a quicker turnaround of your accounts if you choose an accounting date of 30 September or 31 December, and then present your accounting records in either February or March.

From 2010, the deadline for 31 March accounts will be 31 December. If you tend to leave your accounts to the last minute, then you may incur late filing penalties due to delays over the Christmas period.

Corporation tax is payable 9 months after the end of your accounting year, so your choice of accounting date may be influenced by when you want to pay your tax each year. For example, our toy retailer might instead choose 31 March so they can plan to pay the corporation tax on 31 December using their Christmas takings.

If none of these factors are very important to you, and you just want the simplest option, we would recommend 31 December or 31 March.

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