What is the UK fiscal year, and why is it important?
The financial year, also referred to as the tax year or fiscal year, is a 12-month period used for tax and accounting reporting. Governments and companies alike use the financial year to calculate their profits, losses, taxes and more. The financial year varies from country to country which adds a level of complexity for accountants and financial professionals. Some align their tax year with the calendar year. In the United Kingdom, the financial year runs from 6 April of the current year and ends on 5 April of the following year.
The financial year is important for businesses and individuals to know so they can properly document their fiscal activities as per government-approved standards and submit them for review accordingly. For example, the self-employed have deadlines to follow in order to register, submit and pay their income tax to HM Revenue and Customs. Also, all journal entries, charts of accounts and balance sheets must align with the financial year to ensure compliance and accurate financial planning.
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Why does the UK financial year start in April?
The UK’s financial year begins in April due to historical shifts in calendar systems. In the mid-1700s, the British Empire used the Roman Julian Calendar, celebrating the new year around 25 March. To align with the rest of Europe, the UK adopted the Gregorian Calendar in 1752, necessitating an adjustment in the fiscal calendar. The government moved the start of the fiscal year to 5 April to account for lost days during the transition. Following a leap year adjustment in the 1800s, the start date was shifted to 6 April, where it has remained ever since.
Key dates for employers
Employers need to be aware of several key dates in the UK financial year:
- 4 April: the PAYE registration deadline
- 6 April: the start of the new financial year. This is often when new tax rates and rules come into effect.
- 31 May: deadline for companies to provide employees with their P60. This document summarises total pay and deductions for the year.
- 6 July: deadline to report employee benefits and expenses. This coincides with the submission of the P11D to HMRC.
- 5 October: last day to register for Self-Assessment tax returns. To complete a return for the 2023/2024 tax year, those who need to register must do so by 5 October 2024.
- 31 December: the end of the calendar year. This is the deadline to report any capital gains.
- 31 January: deadline to submit Self-Assessment tax returns and pay Capital Gains Tax.
- 5 April: the end of the financial year.
Aligning business operations with the financial year
The end of the financial year, 5 April, is an important date for finance departments because it marks the deadline for calculating and reporting the year’s financial data, including profits, losses and the overall financial health of the company. Here are other important aspects to consider when adjusting operations according to the financial year:
Year-end close procedures
- Data collection: finance teams gather all necessary financial data while ensuring data protection, including transactions and adjustments
- Evaluation and reconciliation: detailed reviews and reconciliations of business expenses, income, revenue, assets, equity and investments performed to ensure accuracy
- Audit preparation: frequent audits require that the final financial statements are prepared and verified
For finance teams, the end of the year is associated with a large workload, including tasks such as:
- Manual data entry
- Collection of receipts and other financial documents
- Vigilance against human errors and duplicate entries
- Identification of all payments
One of the best ways to prepare for the end of the fiscal year is to use a thorough checklist to ensure that no aspect of the financial process is overlooked.
Related: What is discounted cash flow?
The exception for companies
While the financial year for individuals and the government in the UK runs from 6 April to 5 April, companies operate on a slightly different timeline. For companies, the financial year is also a 12-month period, but it is not aligned with the standard UK financial year. Instead, it is set based on the company’s incorporation date.
According to HMRC, ‘Your first accounts usually cover more than 12 months’. This is because the financial period:
- Starts on the day your company was set up (‘incorporated’)
- Ends on the ‘accounting reference date’ set by Companies House which is the last day of the month in which your company was set up
Although companies’ financial year start dates are varied, they still need to bear in mind the government’s financial year dates for tax reporting and compliance purposes. Check the HMRC website for further details on this.
Related: What Is the FSB? How the Federation of Small Businesses can help
Tips for businesses on handling the end of the financial year
To assist you with these important dates, below are some tips to make the end of the financial year a smoother process for your organisation and finance teams:
Automate processes
Automating the process with digital accounting software saves a considerable amount of time and reduces the likelihood of human errors.
Streamline departmental budget reporting
All departments ought to provide clear and timely financial information to the finance team. Failing to do so could lead to outstanding debts and complicate bookkeeping. Ensuring that each department regularly reports its expenditures and project budgets will prevent end-of-year financial discrepancies.
Implement a process for timely expense reports
Expense reports should be accurate and submitted on time throughout the year, especially as the year-end approaches. Encourage staff to submit all receipts and expense documentation well before the closing period. Late submissions can create significant challenges for finance teams and potentially affect the overall financial health of the company.
Adopt digital reconciliation
Alongside automation, digital reconciliation processes can streamline end-of-year accounting tasks. By adopting digital tools specifically designed for reconciliation, companies can streamline work efforts, minimise errors and boost their employees’ digital experience.
The financial year is a highly important period for businesses, providing a structured timeline for managing taxes, profits and losses. Being aware of key dates and taking proactive steps are essential for maintaining compliance and optimising financial performance. To support their financial teams during this busy time, businesses are encouraged to invest in tools and solutions that enhance more efficient processes.
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