Should I change my BTL Limited Company Year End?

Is your BTL limited company year-end making life difficult for you? Unlike personal tax, for which we all file a tax return to the 5^th April each year, limited companies file accounts based on accounting periods. The first accounting period usually covers more than 12 months because the starting date is the date that the company was incorporated ending on the ‘accounting reference date’, i.e. the last day of the month the company was set up. In the following years, the accounting reference date will normally cover the company’s financial year.

Example

If a company is incorporated on 21^st August 2022, its accounting reference date will be 31 August 2023, so the first accounts cover 12 months and 10 days. The accounts will be from 1 September to 31 August in the following years.

Why consider changing the year-end date

For many landlords trying to keep a track of personal income and income from their BTL limited company can become cumbersome because of the differing year ends. Preparing accounts for the company to say 31^st August whilst having to report their income to 5^th April often leads to confusion, the juggling of payment of dividends and problems with the repayment of an overdrawn directors loan account.

Further issues arise when trying to put together a statement of up-to-date earnings for mortgage lenders. Many landlords are also not sure of what their likely income for a tax year will be until nearer the 5^th of April so tax planning to take advantage of say any lower rate tax band can become a bit hit and miss.

So what year-end date should you have?

For most landlords, we suggest either a 31^st December or 31^st March year-end. A March year-end aligns your company accounts with your personal income and makes it easier to understand both. A December year-end leaves you enough time to adjust any income you may wish to draw before the tax year-end and also makes provision for pension contribution planning much easier.

This is just one of the ways we can help you run your BTL limited company so that it works for you. Speak to me or one of our team of specialist property accountants today to fix up a consultation about all things property on 0800 907 8633, via tax@fixedfeetr.com or via our online contact form.

If you enjoyed this article on should you change your BTL limited company at the year-end, then why not read our post on buying property through a limited company or non-resident capital gains tax next?

Thandi Nicholls Ltd
Creative Industries Centre
Glaisher Drive
Wolverhampton
West Midlands
WV10 9TG