Financial year-end: essential checklist for small businesses

The financial year-end is an important time for any business. Whether you are a sole trader or own a limited company, you report your business's financial performance during this period to HMRC and Companies House. 

Here, we explore everything you need to do, from company tax returns and essential deadlines to financial statements and getting your affairs in order.

Key takeaways

• Stay tax-compliant - Manage tax obligations, file VAT returns if applicable and review PAYE contributions for your employees on time to avoid penalties

• Organise financial records - Reconcile your accounts, review financial statements, and update inventory to reflect the true state of your business

• Plan for the future - Set new financial goals, revise your business plan, and consult with experts if needed to prepare for the challenges and opportunities of a new year

What is a financial year?

Businesses monitor their financial performance during the financial year and submit a final report on it at the end. This involves checking records for discrepancies, gathering expense receipts, filing tax returns, paying tax bills and submitting financial statements. 

The financial year runs from 6 April to 5 April for individuals and sole traders. This 12-month period is also known as the tax year. This differs from the government’s financial year which runs from 1 April to 31 March and is used for corporation tax.

For limited companies, the financial year defaults to the last day of the month of the company’s incorporation date, as designated by Companies House. While limited companies can choose their financial year dates, HMRC caps a single corporation tax accounting period at 12 months. Regardless of their accounting period, limited companies must still adhere to all tax deadlines.

What do I need to file?

Tax is a top priority for most small business owners at the end of the financial year.

There are a few things you need to file, and depending on whether you run a limited company or you’re a sole trader the specifics differ. So let’s break it down.

Sole traders

As a sole trader, you typically submit your self-assessment tax return and pay your tax bill, either online or by post. In your self-assessment, you declare your earnings for the year and list your expenses. After deducting your business costs from your total income, you are left with the taxable income. HMRC calculates what you owe, including National Insurance contributions. Once you have this figure, you must pay the tax owed.

However, under Making Tax Digital (MTD) for Income Tax, sole traders with qualifying income over £50,000 must now keep digital records and send quarterly updates to HMRC using compatible software, before submitting their final tax return as normal. The income threshold falls to £30,000 from April 2027 and £20,000 from April 2028.

Limited companies

If you run a limited company, you must file documents with HMRC and Companies House. This typically includes two items:

Your company tax return

This details your company’s income, expenses, and any tax allowances. HMRC uses these figures to calculate the corporation tax you owe.

Your statutory accounts 

Also known as your annual accounts, this summary of income and expenditure must be sent to Companies House, your shareholders, and HMRC as part of your company tax return. 

Companies House publishes the information. Your statutory accounts should include:

• Statement of Financial Position - This reports your business's assets, debts, capital, and reserves, showing the overall value of your company. It was previously known as a Balance Sheet

• Footnotes - These provide additional information to clarify sections in your Statement of Financial Position

All companies must also file a confirmation statement with Companies House at least once a year. This confirms that the information it holds about your company is up to date. 

If you’re VAT registered, your VAT return may also be due around the same time as your year-end accounts.

What are the deadlines?

To avoid penalties, fines or even prosecution, there are key deadlines you must meet. Here are the deadlines for the 2023/24 tax year:

Sole trader

• Register for self assessment by October 5, 2025 

• Submit paper tax return by midnight on October 31, 2025, or

• Submit online tax return by midnight on January 31, 2026

Limited company

• File first company accounts with Companies House 21 months after the date you registered with Companies House

• File annual accounts with Companies House nine months after your company’s financial year ends

• Pay corporation tax nine months and one day after your accounting period ends

• File a company tax return 12 months after your accounting period ends

Year-end checklist

Tax deadlines are a key part of your year-end obligations. However, there’s much you can do beyond that to avoid stress at the end of the financial year. Consider the following to start the new financial year with both confidence and a reliable cash flow.

• Review financial statements

Record all income and expenses accurately and check your records reflect the year you’ve had. Verify that your business’s assets, debts, and equity are correct too.

• Chase invoices

Start the new year with a clean slate by ensuring unpaid invoices don’t carry over into the new reporting year. Follow up on any unsettled invoices and remind clients and customers that payment is due before impending tax deadlines.

• Organise expenses

It’s both good practice and a legal requirement to keep records of your business expenses. Gather all receipts, purchase orders and supplier invoices now in case HMRC requests them. Staying organised throughout the year makes this easier. And remember, to avoid paying more tax than necessary, you must account for every expense. If organisation has been an issue in the past, consider using accounting software to help in the future – and remember this is a must if you’re in scope for MTD.

• File paperwork

To prepare for a potential audit, ensure your paperwork is in order. This should include bank statements, bills, invoices, and purchase orders. Whether digital or hard copies, make sure you can easily present the paperwork if HMRC comes knocking.

• Carry out a stock inventory

Count your stock and verify it matches your records. If there are discrepancies, investigate further. Suppliers or employees may have more insight, so start with them. If you still can’t reconcile, count it as a loss.

• Assess business performance

Review your business’s performance against your financial forecasts and budgets. Did the year go as planned? Assess profitability by looking at gross profit margins and net income. If things didn’t go as expected or didn’t align with your forecasts, look for opportunities to cut costs or improve operational efficiencies.

• Review employee data

If you employ staff, your business is responsible for any mistakes related to their tax and National Insurance. Before the year-end, check that employee data is accurate to avoid having to recover tax from employees who were overpaid.

• Plan for the next financial year

Set financial goals and budgets for the next year. Revise your business plan based on past performance and new strategic goals for the upcoming year.

• Communicate with stakeholders

If your business has shareholders, prepare to provide them with the year-end financial report and any other relevant updates. If you have employees, inform them about bonuses, pay rises, or any changes to benefits or compensation for the upcoming year.

Depending on the size of your business, consider speaking to a financial adviser or hiring an accountant to ensure you meet all key deadlines and legal obligations when closing out the year.