Accounts Start Date & Accounts Year End

chrisb1357

Hi all,

I am just testing some Accounts / Book Keeping Software and its asking for the Accounts Start Date & Accounts Year End. Am i correct that if i am Sole Trader that my accounts start date is the day i informed HRMC and. When would the year end by.

Chris

chrisb1357

Hi,

Just spoke to an account person not sure if this is correct but he told me to put on my account software the Accounts Start Date as 01/04/2009 and the year end as 31/03/2010.

Is this correct as i did inform HRMC on the 25th June 2009

He said it should not matter but want to make sure on here what is correct or not so my books are not wrong

Chris

fengirl_2

No, your accounts start date is the date you started trading and the year end can be whenever you want, although not normally more than 18mths for your frst year. Most people would go for 31 May with a start date of 25 June.

martindow

I made my accounts match the financial year as that seems to simplify tax calculations. I made my first 'year' short to do this. As has been said you can also make the first 'year' up to 18 months to get the accounting year where you want it.

chrisb1357

so what day do i pick then LOL

Savvy_Sue

Going with the financial year has one significant disadvantage: EVERYONE is busy getting their end of year accounts done, so the accountants are usually very busy.

fengirl_2

When did you make your first sale?

Any

martindow wrote: »

I made my accounts match the financial year as that seems to simplify tax calculations. I made my first 'year' short to do this. As has been said you can also make the first 'year' up to 18 months to get the accounting year where you want it.

I completely agree.

I also agree that accountants are busy during that time of year, but if you put your receipts and invoices and whatever to them during the year, like on monthly basis you will not have a problem. And if you are doing your accounts yourself and you just need them signing, as long as you do it properly it is not going to take an accountant weeks to go through.

I personaly would always put 31st March as the end of the year. It makes tax calculation sooooooo much easier (and therefore also cheaper;))

Horace

My accountant advised me to have my year end date as being 30 April.

fengirl_2

30 April used to be an advantageous year end date prior to self assessment. Now there is no advantage one way or the other. Having your year end fit with the tax year has no advantage and, as Savvy Sue says, this is a very busy time of year for accountants.

Pennywise

fengirl wrote: »

30 April used to be an advantageous year end date prior to self assessment. Now there is no advantage one way or the other. Having your year end fit with the tax year has no advantage and, as Savvy Sue says, this is a very busy time of year for accountants.

Sorry - have to strongly disagree. If your profits are rising, there are timing benefits in having a 30 April year end as after the first year, you're profits will be taxed almost a year later than if your year end was 5 April. Your profits for y/e 30/4/10 would be taxed on the 10/11 tax return whereas profits for 5/4/10 would be taxed on the 9/10 tax return! Most accountants use computerised systems these days, so having a year end different to 5 April shouldn't take much (if any) longer time to work out.

The downside is that you have to remember that you are just defering the tax as a timing issue, not reducing the tax, so when you come to wind down or close down, you may find relatively high tax bills at a time of lower income.

There are also incredibly valuable timing benefits of having a year end different to 5 April, so as to use the time-apportionment rules to your benefit to effectively reallocate profits/losses into a different tax year to which they were actually incurred, to use to best advantage considering personal allowances & basic rate bands between different tax years and also maximising loss relief. Very few people realise how valuable these issues can be (even accountants!) and some people think that it's not worth doing because it's more complicated. I've regularly saved clients' tax of several hundred pounds for an hour or so of my time, costing them far less!, by crunching the numbers.

My advise would be not to make any firm decisions about your year end until you pass it. Most decent software allows you to change your year start and end dates very easily (eg Quickbooks) - I don't think you can do it so easily with Sage - no doubt it will be another "chargeable extra" that you have to send them the data to do for you!!! For my new clients, I tend to tell them to make up their first "year" to say 30 April or 31 May and then I'll do the number crunching to see the effects of different year ends on their taxes, and then we can choose the best. You have to remember that you don't have to commit to a fixed year end from the outset. The first time you adopt a year end date is when you file your first tax return - even after that, it is possible to change to another date, so it's not a big deal to be worrying about so early on in the life of a business.

Of course, if you have been unlucky enough to buy a dinosaur software product like Sage that doesn't faciliate easy changing of your year end, then you do have to make a decision, long before it becomes necessary, which, sad to say, is fairly typical of that kind of old fashioned software.