According to the recent reforms and incorporation of making income tax digital, all taxable
profits of a trading partner business will be assessed on the profits arising in the tax year, unlike
what was being practiced earlier, i.e., profits ending in the tax year. It will be implemented in
from the tax year 2024/25.
In more accessible terms, a company’s profits are presently assessed or are taxed based on the
current tax year. This means that if your company’s financial accounting date is June 30th each
year, your taxable profits will be the profits ending that year, i.e., June 30th, 2022, for the year
It is better to change your accounting date to March 31st than keep it early in the year if you are
an individual company or running in partnership. We will help you understand why. Let’s take an
example if you are setting up your organization/company on December 15th, so your company’s
accounting period will run from the time of incorporation to the end of the month plus one year.
So, the first accounting period of your company will be December 31st the following year. The
same rules apply even if your incorporation month is May, June, or July. Now here is why you
should change your accounting date to March 31st. A date like December 15th or February 15th
is hard to remember, and it doesn’t align with the tax or the financial year. It will result in adding
up more work for you. You will have to deal separately with this and your tax returns and all the
So, you should change your accounting date to March 31st. This date will align your financial
year with your tax year so that interests you are charging, any dividends you might take out, or
any interest paid in your company will account for your tax return. It is a fantastic date that will
make managing your account easier. You can either shorten or extend your accounting period to
18 months to change and get the correct accounting date.
What are the rules for changing the accounting date?
If you plan to change your financial accounting date to 31st march in the tax year 2022/23, then
the basic rules of changing the date remain the same. It means that:
⮚ You can lengthen the financial year of your organization for a maximum of 18 months only
for commercial reasons. Under what circumstances can you extend this period? It can be
drawn longer if your organization or business is in administration or in case companies house
has granted you special permission.
⮚ You will have to notify the revised date of your financial year in the self-assessment tax
⮚ You will have to apportion profits from two periods if you change the financial accounting
date in the year 2022/23.
⮚ You can change your financial accounting date once in five years
What are the benefits of changing the accounting date in the transitional year?
2023/24 will be the transaction year. If you make a change once the transitional tax year, i.e.,
2023/2024, you will be able to spread the access to profit relief, and no profit overlap will be
created. Further, there is a minimal risk, and you will be saved from apportioning profits over
two periods. Aligning the tax year with the financial year or personal tax return year will make
things less messy for you. You can make this easier and more effective by changing the
accounting date to 31st March. Hence making a date change after the tax year 2023/24 will make
the process smoother and more manageable.