Understanding Accounting Periods for Corporation Tax

Your accounting period determines when you need to pay Corporation Tax and file your Company Tax Return. It's usually 12 months long and aligns with your company's financial year, but there are important rules and exceptions you need to understand to avoid penalties and stay c...

What is an accounting period?

Your accounting period for Corporation Tax is the time covered by your Company Tax Return. It's the period for which you calculate and report your company's profits or losses to HMRC.

In most cases, your accounting period matches your company's financial year — the 12-month period covered by your annual accounts. However, your accounting period can never be longer than 12 months, even if your financial year is.

How your first accounting period is set

When you register your company for Corporation Tax, HMRC will send you a letter with the dates of your first accounting period. You should check these dates carefully when you receive them.

If you believe the dates are incorrect, contact HMRC to query them. Getting this right from the start helps you avoid confusion about when your tax returns and payments are due.

You can also check your accounting period dates at any time by signing in to your business tax account through HMRC's online service.

Why your accounting period matters

Your accounting period is crucial because it determines:

When your Company Tax Return is due (12 months after the accounting period ends)
When you must pay Corporation Tax (9 months and 1 day after the accounting period ends)
How your profits are allocated for tax purposes, particularly if tax rates change

Getting your accounting period wrong or failing to update it when you change your company year end can result in late filing penalties and interest charges.

Changing your company year end and its impact

You can change your company's year end (also known as its accounting reference date) to make your financial year run for more or less than 12 months. You can only do this for your current financial year or the one immediately before it.

Rules for shortening your financial year

You can shorten your company's financial year as many times as you like. The minimum period you can shorten it by is just 1 day.

When you shorten your financial year, your accounting period will normally also be shorter than 12 months and will end on the same day.

Rules for lengthening your financial year

You can lengthen your company's financial year to a maximum of 18 months (or longer if your company is in administration), but only once every 5 years.

You can lengthen it more frequently than every 5 years only if:

Your company is in administration
You're aligning dates with a subsidiary or parent company
You have special permission from Companies House

You cannot change your company's year end when your accounts are overdue.

Important warning about filing deadlines

Changing your company's year end will also change your deadline for filing accounts with Companies House, unless you're lengthening your company's first financial year.

If you had an extension to your filing deadline, it will no longer apply once you change the year end. If your new deadline has already passed when you make the change, you'll have to pay a late filing penalty.

When your accounting period differs from your financial year

Because your accounting period cannot be longer than 12 months, specific situations arise when your financial year doesn't match your accounting period.

If your accounts cover more than 12 months

When you lengthen your company's financial year, you must file 2 Company Tax Returns to cover the full period — one for the first 12 months, and another for the remaining months.

You must contact HMRC to update your accounting period dates before the original filing date of your Company Tax Return. Failing to do this may result in a late filing penalty.

Example: Your company's year end is 31 December 2024 and you lengthen it to 31 March 2025. You would need to update your accounting period dates with HMRC before 31 December 2025 and file all returns by 31 March 2026.

If your accounts cover less than 12 months

Your accounting period will also be shorter than 12 months and normally ends on the same day as your shortened financial year.

How you update the dates depends on how you file:

If you use HMRC's online service, contact HMRC to update your accounting period dates before you file your return
If you use accounting software, enter the new dates for your accounting period before you file your return

Other situations when periods may differ

Your accounting period can also differ from your financial year:

In your first year of business
When you restart a dormant company
When you stop trading and become dormant
When you close your company

In each of these situations, you'll need to understand the specific rules that apply to ensure you meet your Corporation Tax obligations correctly.

How to change your company year end

To change your company's year end with Companies House, you can either:

Use the Companies House online service
Download and complete the application form and send it by post

Remember that changing your company's year end with Companies House will normally affect your accounting period for Corporation Tax. You must separately update your accounting period dates with HMRC if you've shortened or lengthened your financial year.

Sources

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.