Preparing a set of annual accounts is a legal requirement if you run a limited company, but it can be daunting, particularly if you’ve never done it before. Thankfully, it’s now easier than ever to get your accounts right the first time. 

In this article: 

  • What are company accounts? 
  • What do I need to file? 
  • When does my tax year start? 
  • What is the tax return deadline?
  • When is my tax due?
  • How do I file a tax return and company accounts?

What are company accounts?

Every private limited company must file accounts each year to Companies House, HMRC and to every member of the company. It’s part of the small business accounting practices you’ll need to know if you’re starting your own business. Small and micro businesses can file simpler, abridged accounts, as long as they meet certain criteria on turnover and size.

A company counts as ‘small’ if it checks two of the following:

  • a turnover of £10.2 million or less
  • 50 employees or less
  • £5.1 million or less on its balance sheet

A company will be considered a micro-entity if it has up to ten employees, a maximum turnover of £632,000 and/or a balance sheet of £316,000 or less.

Accounts are prepared at the end of a company’s financial year from your records. If you use online accounting software like Countingup to automate your bookkeeping admin throughout the year, you’ll be saving hours of time on admin, with all your organised financial data in one app . Basic accounting knowledge is all you need to use the app effectively and easily. 

What paperwork do I need to file?

  • A balance sheet which details everything the company owns
  • An income statement which will show sales, running costs and any profit or losses made in the last year
  • Notes about the accounts
  • A directors’ report, unless the business is deemed a micro-entity 

Smaller businesses and micro-entities have to meet minimum statutory requirements and usually only submit a balance sheet. They can opt to send a profit and loss statement and a directors’ report if they wish. If you use online accounting software, then this information should be readily available on the dashboard.

When does my tax year start?

Your tax year will depend on when you started your company. Statutory company accounts cover the 12-month period which ends on the company’s accounting reference date (ARD). If you‘re starting a business on May 11, for example, then your ARD will be May 31 the following year, so 12 months and three weeks. In subsequent years, your accounts will run from June 1 to May 31. 

What is the deadline for filing tax returns?

When it comes to accounting for startups, a private company has 21 months from the date registered with Companies House to file your first set of accounts. For subsequent years, it usually has nine months from the ARD to file accounts with Companies House. If you fail to file your accounts on time your business can be fined. Penalties for private companies range from £150 for submitting up to a month late and go up to £1,500 if you’re more than six months late.

A business must file a company tax return 12 months after the accounting period for corporation tax ends. This is usually the same 12 months as the company financial year and covered by annual accounts.  

Businesses can file their statutory accounts and tax returns with Companies House and HMRC at the same time or separately.

When is my tax due?

Businesses with taxable profits of up to £1.5 million must pay their limited company tax, more commonly known as corporation tax, within nine months and one day after the end of their accounting period. Businesses with taxable profits of more than £1.5 million must pay in installments.

The accounting period is usually the same as the financial year but if it’s your first year of trading you may have two tax returns to file and therefore two payment deadlines to meet. This is because your tax return can’t be longer than 12 months and if you started trading in the middle of the month, then your accounting period for the first year will be slightly longer than 12 months. Therefore you may need to submit two tax returns in your first year of trading. All subsequent years will have just one return and payment deadline. 

How do I file a tax return and company accounts?

Small businesses or micro-entities can use the Company Accounts and Tax Online Service to file both to HMRC and Companies House. 

You can hire an accountant to help you with your accounts, but it isn’t compulsory as long as your business meets international financial reporting standards and sticks to new UK generally accepted accounting practice. Most limited companies use an accountant though to make sure all records are filed correctly and to remove the stress and time-consuming nature of business accountancy. 

Accountancy services can be expensive and if cost is an important factor then you can use online accounting software to do much of the groundwork yourself, leaving an accountant to finalise everything for you. Be aware that even if you do employ an accountant to file your company accounts and tax return, as a director of the company you’re still legally responsible for ensuring the accounts are accurate. This would usually incur having to verify and provide a final approval on any draft filings prepared by the accountant.

Filing statutory accounts is compulsory and it’s important to do it correctly. Using an accountant in combination with online accounting software should mean the process runs smoothly, leaving you with more time to run your business.

Countingup is the business current account with inbuilt accounting software that automates your accounting admin so that you can focus on making your dream venture a success. Find out more here.