The Ultimate End-of-Year Checklist for Small Businesses in the UK
As the year comes closer to an end, it’s important for every business whether small or large in the UK to file their annual year-end accounts which are also called ‘Statutory Accounts. These are legal requirements for all companies to complete annually which consists of a set of accounting and business reports that summarises a limited company’s financial performance over 12 months. A year-end is a date when a business fiscal year ends. Companies or businesses are allowed to choose their date for year-end accounts. Every limited company has its financial year, usually, the easiest way to use a year-end date is March-April (it ends in march&begins in April) and some new businesses can be shorter than 12 months.
Year-end accounts have important functions which include;
- It identifies any balances or deficiencies on the company’s books that are carried over into the new financial year which creates more realistic budgets based on what was spent in the previous year
- To maintain good fiscal hygiene by monitoring the company’s financial health.
- It provides vital information on how well the business is being managed by letting shareholders know how the business is operating and providing the basis for accessing your liabilities under ‘Corporation tax’
Startups of London have compiled an Ultimate End-of-year checklist for small businesses to assist company directors in the UK to understand what needs to be done. This will make your tax and accounting filling much more effortless for you.
As a small business owner, while filing your company’s end-of-year account which must be prepared and submitted to ‘companies house’ (Uk’s registrar of companies) each financial year are;
- Balance sheet- A balance sheet reveals a company’s position by displaying its total assets and how the assets are being financed and managed either through debts or equity. The balance sheet is one of the most important parts of the year-end accounts because it shows
- The Company’s debt
- The complete value assets
- What’s due to be paid to the business up to the last days of the financial year?
The balance sheet should include;
- Current assets
- Net assets
- Tangible assets
- Intangible assets
- Short-term assets
- Long-term assets
- Shareholder equity
- Equity capital
- Cash at hand and in the bank.
For small businesses, the balance sheet might be prepared by the owner or a company’s bookkeeper, and for bigger businesses, it might be prepared internally and then cross-checked by an external accountant which the director has to sign with an approval statement by the board. The size of your company will determine additional accounting requirements. Your business will qualify as a small-sized business depending on its turnover, balance sheet, and the number of employees.
Profit and Loss account
A profit and loss account or statement of operations is a financial report that provides every detail of a company’s revenue, sales, expenses, and profit/loss over the financial year. It lists revenue-generating items along with tax-deductible expenses by showing all the combined figures and its final profit/loss after deducting costs from sales.
The profit and loss account should include-
- Cost of sales
- selling, general and administrative expenses
- Net Profit
- Interest Expense
- Gross profit
- Turnover EBITDA (Earnings before interest, taxes, depreciation, and Amortization)
- Operating Profit
The Profit and Loss statements use every information from your business and simple calculation formula to tell you the net profit/net loss of your business. This usually gives information about where your business is headed to.
When putting together the entire figures of your profit and loss account, carefully check all your cost including the cost of sales and operating costs inclusive of your capital allowances to ensure that you have maintained all business expenses against your corporation tax liability.
The cash flow statement
The cash flow statement shows how much cash is generated and used in a company. It shows money going in and out of any business. It typically includes operating activities, investing activities, and financing activities. The total cash provided from these three activities is summed to arrive at the total change in cash for the period which is then added to the opening cash balance to arrive at the cash flow statement’s bottom line. The cash flow statement is a very important factor to determine the financial health of your business, this makes it very essential to forecast cash flow through the financial year rather than waiting till the year ends.
Cash flow forecasting involves your future sales and expenses. It’s a vital tool for your business because it gives you an update on whether there’s enough cash to run the business or expand it. The good thing about cash flow statement and forecasting is that it gives you advanced notice of cash flow problems and insights on how to tackle the problems.
Under the requirement of the UK company’s law, a director’s report outlines the growth opportunities, health of the company, outlook, financial management, and compliance with a set of financial, accounting, and corporate social responsibility standards. The director’s report helps stakeholders of the company understand the current financial status of the company and its future scope. It should describe all the main activities of the business. It’s very important to provide information on your business performance over the past financial year also remember when you are submitting accounts, the balance sheet must have the name of a company director printed on it and be signed by the director. The director is primarily responsible for the account annual signing.
Notes to the Accounts compile details on the information presented in the balance sheet, income statement, and cash flow statement. It reflects the accounting principles and the facts that can have a significant impact because they provide additional information regarding the methodology, valuation, period, and myriad other calculation nuances. The notes give extensive details on the numbers given in the accounts.
Typical notes include- a reconciliation of operating profit to operating cash flow which can be used to calculate EBIDTA and working capital movements.
- Details of assets and liabilities
- Geographic breakdown of sales can give investors exposure to the business.
Tax year basis from April 2024. However, from 2024/2025 a business will be taxed on its profit for the tax year i.e. the profits from 6th April and the start of the tax year to 5th April at the end of the tax year.
Year-end accounts have to be filled with both HMRC (Her Majesty’s Revenue and Customs) and companies’ house by different specific dates. However, the dates are different for each.
Your first account since your company’s registration needs to be filled 21 months after registration with the company’s house after that you need to file accounts 9 months after your company’s financial year ends. Your corporation tax return is usually filled 12 months after the end of your accounting period and should be paid 9 months and 1 day after the end of your ‘accounting period’.
Note that if you miss your payment/filling deadline either with HMRC/Companies house, you may be fined. So, it’s very important to ensure your limited company never misses an account deadline. If you need more time to file your account, you may apply for a three-month extension.
For Companies House-
Time after deadline Penalty
The penalty for company tax returns is if you do not pay before the deadline.
Time after your deadline Penalty
If your tax return is late 3 times in a row, the £100 penalties are increased to £500 each.
Submitting Abridged Account
Abridged accounts are a simplified version of a small company’s annual accounts. When completing abridged accounts, certain financial details that are normally present in full accounts can be omitted from the company’s balance sheet and profit/loss statement if it has been agreed upon by the company’s shareholders. As a small business, you have the choice of how you file your accounts by either submitting a full account or an abridged account.
To be eligible for submitting an abridged account, you need to meet the criteria as a small business such as;
Preparing and filing year-end accounts can be very complex and time-consuming, especially for small businesses that need help with invoicing and account reporting will do fine with free or low-cost accounting software. For every business starter, accounting software should be one of the first business applications you need to get. I hope this article gives you every detail in getting your year-end account sorted, if you need more details, you could refer to the HMRC website.