The article covers year-end accounting requirements for UK limited companies, including how to reconcile accounts, make adjusting entries, prepare statutory financial statements, and file with HMRC and Companies House. It explains filing deadlines, late filing penalties, common problems during the closing process, and best practices for streamlined year-end preparation.
Every limited company must complete year-end accounting to satisfy UK legal requirements and calculate its tax bill. The process determines whether your business made a profit or loss during the fiscal year. You reconcile bank accounts, adjust for accrued expenses and prepayments, count physical inventory, calculate asset depreciation, and prepare final financial statements. These statements go to HMRC with your corporation tax return and to Companies House as public record.
What does year-end accounting mean for limited companies?
Year-end accounting is the process of closing your company’s financial books at the end of its fiscal year, recording all transactions, calculating profit or loss, and preparing mandatory financial statements for tax authorities and regulatory bodies.
The fiscal year-end marks the cutoff date for recording all financial activity. Every transaction from the beginning to the end of this period gets captured in your accounts. The year-end date is your accounting reference date, which you chose when incorporating your company or can change with Companies House approval.
This closing process moves income and expense balances from temporary accounts into permanent ones through adjusting journal entries. Temporary accounts reset to zero for the new fiscal year. Permanent accounts like assets, liabilities, and equity carry forward their ending balances.
Q&A: Can I change my company’s year-end date?
Yes. File form AA01 with Companies House to shorten your accounting period or extend it once every five years. You cannot extend beyond 18 months total. The change affects when your next accounts are due, so plan ahead to avoid late filing.
What are year-end journal entries?
Year-end journal entries are accounting adjustments made at the fiscal year-end to match revenues and expenses to the correct period, transfer temporary account balances to permanent accounts, and make financial statements accurately reflect the company’s financial position.
These entries correct the books before producing final statements. Common adjustments include:
- Accruals record expenses incurred but not yet paid, such as utilities used in March but billed in April
- Prepayments account for advance payments like annual insurance paid upfront but covering future months
- Depreciation spreads the cost of fixed assets like computers and vehicles over their useful life
- Bad debt write-offs remove uncollectible customer invoices from accounts receivable
- Inventory adjustments reconcile physical stock counts with recorded quantities
Without these adjustments, your profit figure would be wrong. You might overstate income by including next year’s revenue or understate expenses by missing accrued costs.
Further Reading: What Does “Inclusive of VAT” Mean?
How do I prepare year-end accounts?
Preparing year-end accounts requires systematic reconciliation, adjustment, and documentation. Follow these steps in order:
Set your closing date and workflow
Choose a cutoff date 2-4 weeks before your fiscal year-end. This gives your finance team time to process final transactions, make adjustments, and prepare statements without rushing. Document who handles each task and set internal deadlines.
Reconcile all accounts
Match every bank statement, credit card statement, and supplier account to your accounting records. Investigate any differences. Check that cash balances in your books equal actual bank balances. Confirm accounts receivable matches what customers owe and accounts payable matches what you owe suppliers.
Companies that use dedicated business payment cards with real-time transaction tracking usually get through reconciliation much faster at year-end. Having downloadable transaction records, matched receipts, and clearly categorised expenses means less time hunting for missing details during closing.
Count physical inventory
Conduct a physical count of all stock on hand. Compare the count to your inventory records and adjust for shrinkage, damage, or obsolescence. The inventory value on your balance sheet must reflect actual stock.
Review fixed assets and depreciation
Update your fixed asset register for any purchases, disposals, or fully depreciated items. Calculate depreciation for each asset based on its useful life and method. Record the depreciation expense.
Record adjusting entries
Make all accruals, prepayments, depreciation, and bad debt adjustments. These entries make revenues and expenses appear in the correct accounting period according to the matching principle.
Calculate tax liability
Determine your taxable profit by applying allowable deductions and reliefs to accounting profit. Calculate corporation tax at the current rate. Accrue for the tax liability on your balance sheet.
Prepare financial statements
Generate your balance sheet, profit and loss statement, cash flow statement, and notes to the accounts. These comprise your statutory accounts. Review them for accuracy and reasonableness before finalising.
Q&A: Do micro-entities need full accounts?
Micro-entities may qualify to file simplified accounts with Companies House if they meet specific size criteria for turnover, balance sheet total, and number of employees. Even if you file simplified accounts publicly, you must still prepare full records for your own accounting and for HMRC.
What are the filing deadlines for limited companies?
Limited companies face two sets of filing deadlines with different agencies. Both have strict deadlines and automatic penalties for late submission.
| Agency | What to file | Deadline |
| HMRC | Company tax return (CT600) and accounts | 12 months after year-end |
| Companies House | Statutory accounts | 9 months after year-end |
For example, a company with a 31 December 2025 year-end must file accounts with Companies House by 30 September 2026 and with HMRC by 31 December 2026.
The HMRC filing includes your CT600 tax return showing your corporation tax calculation plus supporting accounts. You cannot submit the tax return without finalised accounts because the tax calculation depends on your profit figure. Corporation Tax itself is normally due for payment 9 months and 1 day after the end of your accounting period, which is earlier than the tax return filing deadline.
A newly incorporated company has a longer deadline for its first set of statutory accounts. These are usually due 21 months after the date of incorporation, unless the accounting reference date has been changed.
Further Reading: P60 explained: your year-end tax summary in the UK
What happens if I file late?
Both HMRC and Companies House impose automatic penalties for late filing. These escalate the longer you delay.
HMRC penalties for late tax returns:
- £100 if the return is up to 3 months late
- Another £100 if more than 3 months late
- Additional penalties may apply after 6 months and 12 months, and HMRC can estimate your Corporation Tax bill if the return is still outstanding
- Interest and late payment penalties apply separately if Corporation Tax is paid late
Companies House penalties for late accounts:
- £150 if up to 1 month late
- £375 if between 1 and 3 months late
- £750 if between 3 and 6 months late
- £1,500 if more than 6 months late
Penalties double if accounts are filed late two years in a row. Continued failure to file can lead to the company being struck off the register and legal action against directors.
Q&A: Can I appeal late filing penalties?
Yes, if you have a reasonable excuse like serious illness, system failure, or fire destroying records. You must appeal within 30 days of the penalty notice. HMRC and Companies House review appeals case by case. Simply being busy or forgetting the deadline is not a reasonable excuse.
What other compliance requirements exist?
Beyond annual accounts, limited companies must handle ongoing compliance obligations:
- The confirmation statement updates Companies House with current company details within 14 days of your incorporation anniversary. This confirms shareholder information, registered office address, and directors remain accurate.
- VAT-registered companies file returns quarterly or monthly depending on their assigned schedule. VAT due must be paid by the deadline to avoid interest and penalties separate from corporation tax obligations.
- PAYE and payroll submissions happen monthly if you employ staff. Report employee pay and deductions to HMRC through Real Time Information by the payment date.
Q&A: Should I hire an accountant for year-end?
It depends on your company size and complexity. Simple companies with basic transactions can use accounting software and handle year-end internally. Companies with inventory, multiple revenue streams, international transactions, or complex tax situations benefit from professional accountants who ensure compliance and optimise tax positions.
What best practices streamline year-end?
Effective year-end preparation starts months before your fiscal year ends:
- Reconcile accounts monthly instead of waiting until year-end. Catching discrepancies early prevents them from compounding. Monthly reconciliation spreads the work across the year.
- Review account balances quarterly to identify unusual items needing investigation. Question anything that looks wrong before it becomes a year-end emergency.
- Maintain a fixed asset register throughout the year. Update it immediately when buying or disposing of assets. Calculate depreciation monthly so the year-end figure is ready.
- File invoices and receipts systematically as they arrive. Digital filing makes documents searchable and prevents loss. Paper filing requires consistent organisation by date or supplier.
- Back up accounting data regularly using secure cloud storage or external drives. Test your backups to confirm they work. A backup protects you from data loss during the critical year-end period.
- Create a year-end checklist three months before your deadline. Assign tasks to specific team members with internal deadlines earlier than the statutory deadlines. This buffer catches problems before they cause late filing.
A business expense setup that keeps transaction history, merchant details, and digital receipts in one place makes year-end admin far easier to handle. Cards with built-in spending limits also help keep company purchases separate and straightforward to review when preparing accounts.
