To what date do I prepare accounts?

To what date do I prepare accounts?

Your self employment will generally commence, for income tax purposes, when you are on your feet and therefore able to accept briefs. It may, however, commence earlier if you have any devilling income. Your year end will determine the tax year in which your income falls to be taxed. You are taxed on what is termed the current year basis of assessment. This means income is assessed to tax in the tax year in which your accounts year end falls.

Year ended Year end falls in tax year ended Profits assessed in tax year
31 March 2014 5/4/14 2013/14
30 April 2014 5/4/15 2014/15

You will see, although there is only one month between them, that the two accounting periods are taxed in different tax years. This may well be a factor in determining your choice of year end. Yes, the choice of year end is entirely down to you. Typically the choice falls down to either 31 March or 30 April. With a 31 March year end, because it closely shadows the tax year, you pay tax very much on a “pay as you go” basis. With a 30 April year end, income is effectively pushed into the next tax year with the result that you pay your tax later on the same income, as your fees increase.

It is important to note that whatever year end you choose, you are still taxed on all your earnings in full over the whole of the period that you are in practice. Your year end affects only the timing of earnings being taxed.

We have prepared a worked example, which demonstrates the effect on taxable profits of choosing either 31 March or 30 April as your year end.

This answer was last checked May 2017. This answer is for general guidance only. It provides an outline, and may not include points which are important in your case. You should not rely on this answer without taking individual advice based on the full facts of your case. The information given was correct at the time of release.