For sole traders and partnerships, year end accounts will form the basis of a business owners’ Self Assessment tax return. If it’s a partnership, the year-end accounts will also state the balance on each partner’s current account. For owner-managed limited companies, the limited company accounts will house details of the directors’ salaries and the dividends paid to shareholders, which they will need to tally with their Self Assessment tax return.
The year-end accounts provide invaluable information about your business. You can see if the margin on your sales prices is set appropriately and how the latest performance compares to last year. Movements in sales and expenses are laid bare, allowing you to make better decisions in the future. Anomalies are highlighted and can then be investigated. Having year-end accounts brings you closer to your business and will help drive success.
When Should You Look At Your Year-End Accounts?
Limited companies, partnerships and sole traders are free to pick whatever year end they like. Many business owners will pick a calendar year or the tax year (either 31st March or 5th April). Picking the tax year will base your tax liability on the latest finalised accounts, and therefore as current as possible. Consequently, some business owners prefer to have a tax year end, because they have a better feel for what their tax liability might be. Opting for the 31st March or 5th April will also avoid any complicated overlap relief calculations for sole traders or partners.
Alternatively, you might choose a year end that suits your business – a quiet time of the year when you can have the time get everything together: count up stock and summarise your unbilled work, etc. If you have other business interests, think about making the year ends all the same. This means the deadlines are easier to remember because they will be similar but does also mean they all come at once!
Should You Do Them Yourself?
If you have the expertise, and are 110% confident in your accounting abilities, you can always do it yourself. However, the fines can get pretty steep if you mess up, so consider NWD Accountancy for your accounting and bookkeeping needs, including year-end accounts.