Year-end accounting is a pivotal time for businesses in the UK. It's a period to review financial performance, ensure compliance with HM Revenue & Customs (HMRC) regulations, and make informed financial decisions for the year ahead. In this in-depth guide, we'll explore the intricacies of year-end accounting, offering insights for both sole traders and limited companies. Additionally, we'll discuss essential tax submissions and payment deadlines for 2023 to help businesses stay compliant and organised.
What's Expected of Businesses at Year-End?
For Sole Traders:
Sole traders are the simplest form of business structure in the UK. Here's what's typically expected of them at year-end:
Financial Statements: Sole traders are required to prepare a set of financial statements, including an income statement (profit and loss) and a balance sheet. These documents summarise the financial performance and position of the business.
Detailed Records: Detailed records of income and expenses must be maintained to accurately calculate the taxable profit. This includes tracking revenue from sales, services, and any other sources.
Expense Receipts: Business expense receipts should be organised and retained. These receipts are crucial for claiming allowable deductions and reducing taxable profit.
Inventory Valuation: If the business maintains inventory, a year-end stock take is essential. It establishes the value of the goods on hand and impacts profit calculations.
Debtors and Creditors: Outstanding debts (debtors) and amounts owed to suppliers (creditors) should be reconciled. This helps manage cash flow and understand financial obligations.
Fixed Assets: Assessing fixed assets for depreciation is important. It ensures that the value of assets is adjusted for wear and tear over time.
Changes in Business: Any changes in business assets or liabilities, such as the acquisition or disposal of assets, must be recorded and reported.
License Renewals: Year-end is an opportune time to renew business licenses and insurance, ensuring compliance with legal and regulatory requirements.
For Limited Companies:
Limited companies, being distinct legal entities, have additional reporting and compliance requirements:
Full Financial Statements: Limited companies must prepare a full set of financial statements, including a profit and loss account, balance sheet, and cash flow statement. These financial statements must adhere to accounting standards, such as Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS).
Annual Filings: Companies must submit their annual accounts and reports to Companies House within nine months of the company's financial year-end. Late filings can result in fines.
Corporation Tax Returns: In addition to annual accounts, limited companies need to file corporation tax returns with HMRC within twelve months of the financial year-end. Any tax owed should be paid by this deadline.
Payroll Responsibilities: Limited companies with employees must adhere to payroll-related deadlines, including reporting PAYE information and employee benefits.
Tax Submission and Payment Deadlines for 2023
Corporation Tax and Companies House
Corporation Tax: From April 2023, the main rate of Corporation Tax will increase from 19% to 25% for companies with profits of £250,000 and over. Here are key deadlines and filing requirements:
Accounts to Companies House: Nine months after the end of the accounting period.
Corporation Tax Payment Due: Nine months + one day after the end of the accounting period.
Corporation Tax Return Due: 12 months after the company's accounting period.
Note: Corporate tax payments must be made before the return is due, but preparing the return in advance helps determine the amount owed.
Income Tax (Self-Employed and Others): Income tax deadlines for self-employed individuals and others with income not taxed at source include:
31 January: Submission of your online tax return and payment of the balance of tax due for the previous year, along with the first payment on account for the current year.
31 July: Payment of the second payment on account for the current year.
Note: If your tax due in the first year of trading is £1,000 or more, you may also need to make a payment on account for the following year.
Actions to Stay on Top of Deadlines
Mark important tax deadlines in your business calendar.
Keep your bookkeeping up to date, ideally on a weekly or monthly basis, to avoid last-minute rushes.
Consider using simple bookkeeping software to streamline record-keeping.
If you work with an accountant, be aware of their earlier deadlines to ensure timely submissions.
Keep your contact details updated with HMRC and Companies House to receive relevant reminders.
Set up your Government Gateway account to access your tax accounts.
Stay informed about changes to Making Tax Digital (MTD) requirements and compliance.
Year-end accounting in the UK involves multiple facets, including financial reporting, tax compliance, and timely submissions. Understanding the expectations and deadlines for various taxes is essential for businesses to remain compliant and financially sound. At Hamollisons Bookkeeping Services, we specialise in guiding UK businesses through these complexities, offering comprehensive support for year-end accounting, tax compliance, and financial planning.
For expert assistance with your year-end accounting, tax submissions, or any specific tax-related queries for your business, please don't hesitate to contact us today.