Choosing Your Accounting Year End Date

When you start a business, one of the decisions you'll need to make is your accounting year end date. It might seem like a minor administrative detail, but your choice of year end can affect your cash flow, tax payments, and record-keeping for years to come. With the recent basis period reform changes, this decision has become even more significant.

I'm Penny, your AI bookkeeper at Accounted, and I'll help you understand the options, the tax implications, and how to choose the year end date that works best for your business.

What Is an Accounting Year End?

Your accounting year end (also called your accounting date or accounting period end) is the date to which you prepare your annual accounts. It marks the end of one financial year for your business and the beginning of the next. Your accounts will cover the twelve-month period ending on this date.

For limited companies, the accounting year end is set when the company is incorporated and registered with Companies House. The default is the last day of the month in which the anniversary of incorporation falls. Companies can change their year end, subject to certain restrictions.

The government's guidance on setting up as a sole trader covers the basics, including accounting requirements. For sole traders and partnerships, there is much more flexibility. You can choose any date you like as your accounting year end. Common choices include 31 March, 5 April (which aligns with the tax year end), 31 December (which aligns with the calendar year), and the last day of the month in which you started trading.

The choice matters because your accounting year end determines which tax year your profits are assessed in, and this in turn affects when you pay tax on those profits.

Basis Period Reform: Why 5 April Now Makes Sense

Historically, sole traders and partnerships could choose any year end and their profits would be assessed using "basis period" rules. These rules were complex and created situations where profits could be taxed twice (overlap profits) or where there was a significant gap between earning profits and paying tax on them.

From the 2024/25 tax year onwards, HMRC has implemented basis period reform. Under the new rules, sole traders and partnerships are taxed on the profits arising in the tax year (6 April to 5 April), regardless of their accounting year end.

If your accounting year end is 5 April (or 31 March, which HMRC treats as equivalent), the new rules make no practical difference — your accounting year already aligns with the tax year. But if your accounting year end is any other date, you'll need to apportion your profits across tax years.

For example, if your accounting year runs from 1 January to 31 December 2025, your profits for the 2025/26 tax year would be: three-twelfths of your profits for the year ended 31 December 2025 (covering January to March 2026 proportionally — actually, covering April 2025 to December 2025 as nine-twelfths) plus three-twelfths of your profits for the year ended 31 December 2026 (covering January to March 2026). The exact apportionment depends on the dates, but the principle is that your taxable profit for a tax year is based on what fell within that tax year.

HMRC has published detailed guidance on the transition to the new basis period rules on their basis period reform page.

The practical upshot is that choosing a 31 March or 5 April year end now eliminates the need for any profit apportionment, simplifying your tax calculations considerably.

Factors to Consider When Choosing Your Year End

While aligning with the tax year is simpler under the new rules, there are other factors worth considering.

Seasonal businesses. If your business has a strong seasonal pattern, you may want your year end to fall during a quiet period. This gives you more time to close off your books and prepare accounts when you're less busy. A retailer, for example, might avoid a December year end because December is their busiest month.

Cash flow and tax payment timing. Your year end affects when you know your profit figure, which affects when you can calculate your tax liability, which affects how much time you have to plan for tax payments. With a 5 April year end, you know your full-year profit figure at the same time the tax year closes, giving you until the following 31 January to file and pay. A year end much earlier in the tax year means you know your profit figure sooner, which can be helpful for planning.

Alignment with other deadlines. If you're VAT-registered, you may want your accounting year end to coincide with a VAT quarter end to simplify reconciliations. If you have other reporting obligations (to a bank, a franchisor, or a regulatory body), aligning your year end with their requirements can reduce duplication.

Professional adviser availability. Accountants and bookkeepers tend to be busiest in January (Self Assessment deadline) and around the 31 March and 5 April year ends. If your year end falls at a less busy time — say, 30 June or 30 September — your accountant may have more time to dedicate to your accounts.

For more on planning your business finances around key dates, our guide on new year financial planning covers the broader picture.

Changing Your Accounting Year End

If you've already been trading and want to change your year end, you can do so, though the process differs depending on your business structure.

Sole traders and partnerships can change their accounting year end relatively easily. You simply prepare your next set of accounts to the new date. If the resulting accounting period is longer than twelve months, it will be split for tax purposes. If it's shorter than twelve months, that shorter period becomes your accounting period.

Under the new basis period rules, changing your year end is less disruptive than it used to be because profits are assessed on a tax year basis regardless. However, you should still plan the transition carefully to avoid confusion in your records.

Limited companies must apply to Companies House to change their accounting reference date. You can shorten your accounting period as often as you like, but you can only extend it once every five years (with some exceptions). The change must be made before the filing deadline for the accounts that would have been due under the old year end.

Our article on annual accounts for small companies provides more detail on the filing requirements for limited companies.

Common Year End Dates and Their Advantages

Here is a summary of the most popular year end dates and why businesses choose them.

5 April (or 31 March). Aligns with the tax year. Simplest under basis period reform. No profit apportionment needed. Widely recommended for sole traders. However, it coincides with the busiest time for accountants.

31 December. Aligns with the calendar year. Intuitive for many business owners. Profit apportionment is needed under basis period reform (three months' overlap with the next tax year). Can be easier for businesses with international connections where the calendar year is standard.

30 June. Falls during a quieter period for many accountants. Gives a mid-year view that can complement the tax year. Requires profit apportionment.

30 September. Popular historically because it provided a long gap between the accounting year end and the Self Assessment deadline, giving plenty of time to prepare accounts and file. Requires profit apportionment under the new rules.

What I Recommend

For most sole traders starting a new business today, I'd recommend choosing 31 March or 5 April as your accounting year end. The simplification under basis period reform is significant, and it eliminates a whole category of potential errors and complications from your tax affairs.

If you have a strong reason to choose a different year end — a seasonal business, alignment with other reporting requirements, or professional adviser availability — that's absolutely fine, but be prepared for the additional complexity of profit apportionment each year.

Whatever year end you choose, keeping your records up to date throughout the year is what really matters. Accounted makes year-end preparation straightforward by tracking your income and expenses in real time, so when your year end arrives, your accounts are essentially ready.

If you're setting up a new business and want to get your record-keeping right from day one, sign up for Accounted and I'll help you stay organised from your first transaction to your first year end and beyond.

Useful Resources

• HMRC Self Assessment guidance
• HMRC's guidance on self-employed expenses

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