What impact do accounting period choices have on UK Corporation Tax filings in 2024/25?

What “accounting period choice” really means for UK Corporation Tax

In UK Corporation Tax, “accounting period” does not simply mean “your financial year” in the everyday sense. It has a specific legal meaning that drives what profits are taxed, which rates apply, which reliefs are available, when returns are due, and how cash moves in and out of your business. For many companies, the accounting period used for Corporation Tax will align with the period covered by the statutory accounts filed at Companies House. But it does not have to, and sometimes it cannot. Choices you make about year-end dates, length of periods, and changes in accounting reference dates can create knock-on effects that matter in 2024/25, especially because rates, thresholds, and compliance expectations are more sensitive to timing than many directors expect.

In practical terms, your accounting period choices affect four big areas:

1) how many Corporation Tax returns you must file and for which date ranges; 2) what tax rates and thresholds apply to the profits in those date ranges; 3) the timing of tax payment and therefore cash flow; and 4) the complexity of computations, including how you apportion profits, reliefs, and losses across periods.

2024/25 is a particularly “timing-sensitive” year for some businesses because the UK now operates a main rate and a small profits rate with marginal relief between them, and the profit thresholds are annual amounts that can be scaled depending on the length of the accounting period and the presence of associated companies. When you change an accounting period or choose a non-standard length, you can change how those thresholds are calculated and, as a result, what rate band you fall into. That can translate into real money and administrative effort.

Accounting period versus accounting reference date: related, but not identical

Companies often talk about “changing the year end” or “moving the accounting reference date.” Those are accounting and Companies House concepts. For Corporation Tax, the accounting period is usually based on the period covered by the accounts, but there are rules that prevent an accounting period from being longer than 12 months. That single rule has a surprisingly large impact: if your accounts cover more than 12 months, you will have multiple Corporation Tax accounting periods within that longer set of accounts. In other words, one set of accounts can generate two Corporation Tax returns.

This most commonly happens when a company is newly incorporated and prepares first accounts that run longer than 12 months (for example, 15 or 18 months), or when a company changes its year end and creates a “long period” of accounts. You might be perfectly happy with the accounting presentation, but for tax you will still need to break that long period into separate accounting periods, each with its own return, computations, and potentially different tax rates.

Similarly, if you shorten accounts (for example, to align to a group year end), you might create a short accounting period for Corporation Tax. Short periods have their own complications: profit thresholds are typically reduced proportionally, loss relief planning becomes more granular, and instalment payment status can shift. The administrative burden is not always huge, but it is rarely zero.

Why 12 months matters: multiple returns, multiple computations, and apportionments

The 12-month limit is the point where “choice” turns into “consequence.” If your accounts cover more than 12 months, you must prepare at least two Corporation Tax returns: one for the first 12 months and another for the remainder up to the accounts end date. Each return needs its own tax computation. Some items in the accounts naturally belong to the whole period and must be apportioned on a “just and reasonable” basis. While time apportionment is often used (for example, dividing profits by days), there are situations where a simple day-count is not the best representation of reality, particularly if profits are seasonal, a major contract started mid-period, or a one-off transaction occurred. In those cases you may have to apportion more carefully.

Apportionment is not just about trading profits. It can affect:

• capital allowances where the qualifying expenditure happened at a specific time; • loan relationship and derivative contract credits and debits that may be time-based; • property business income where rent reviews or vacancies change income patterns; • management expenses and group relief allocations in groups; and • reliefs such as R&D relief where qualifying activity may not be uniform across the year.

Even if the final tax bill across the combined periods would be the same in theory, the work required to produce two accurate computations can be meaningfully more than producing one, and the risk of mistakes rises. That matters in 2024/25 because compliance processes have become more digital and structured; a mismatch between periods, filings, or dates can trigger queries, delays, or penalties.

Rates and thresholds in 2024/25: the timing effect

In 2024/25, the UK’s Corporation Tax regime generally uses a main rate and a small profits rate with marginal relief between the lower and upper thresholds. This structure makes period length and profit allocation more impactful than in a single-rate world. When you choose an accounting period end date, you are also choosing which rate-year(s) your profits fall into.

Most companies will have an accounting period that falls wholly within a financial year for Corporation Tax rates. But if you have a period that straddles a rate change (or a change in the underlying rules that affect the computation), you may need to time-apportion profits across two rate periods. Even without a headline rate change in-year, the interaction with thresholds can still matter. Thresholds are annual amounts and are typically adjusted for:

• the length of the accounting period (shorter than 12 months reduces the thresholds proportionally); and • the number of associated companies (which can reduce the thresholds further when companies are under common control).

So, by choosing a short accounting period (say, 9 months), you also reduce the profit level at which you move from the small profits rate into the marginal relief band and then to the main rate. That can bring you into higher effective rates earlier than you expected, even if your annualised profitability would not have done so on a 12-month basis.

Conversely, a longer set of accounts that is split into two tax periods can cause a different outcome: the thresholds are applied separately to each Corporation Tax accounting period. This can sometimes be advantageous or disadvantageous depending on where profits land and how associated companies are counted during each period.

For directors planning year-end changes in 2024/25, the key is to think in “tax accounting periods,” not just “accounts.” You need to model the profit allocation and threshold scaling, not assume that the rate outcome will be neutral.

Cash flow: payment dates can shift when you change the accounting period

Corporation Tax is usually due nine months and one day after the end of the accounting period for many small and medium companies. That means your year-end date is directly connected to your cash payment schedule. If you move your year end, you may accelerate or delay when tax is due.

Consider a company that normally prepares accounts to 31 March and pays Corporation Tax around 1 January the following year. If it changes to a 31 December year end, the payment date shifts, and in the transition year you might end up making a tax payment earlier than expected. This is especially noticeable when you create a short period: the payment clock starts earlier, and you could be paying tax sooner after the same trading activity.

At the other end of the spectrum, companies that fall into quarterly instalment payment regimes must consider how year-end choices can influence instalment schedules. Large and very profitable companies are generally required to pay Corporation Tax in instalments during the accounting period rather than after it. If your accounting period changes, the instalment timetable changes too. That can be a cash-flow planning issue, and it can also create administrative friction because you may need to recalibrate internal forecasts and treasury processes.

In 2024/25, where interest on late payment can be material, the “shape” of payment timing matters. Even if the total tax is similar, paying it sooner has an opportunity cost. Paying it later increases the risk of interest if forecasts are wrong. Accounting period planning is therefore also cash management.

Return deadlines: changing periods can multiply compliance events

For each Corporation Tax accounting period, a company must file a Company Tax Return. When a long period is split into two tax periods, you are not just filing one return with two sets of dates. You are filing two separate returns. Each has its own filing deadline (normally 12 months after the end of the accounting period), and each can attract penalties if late.

This matters operationally. Many finance teams schedule annual compliance as a single cycle. When you introduce two tax returns for one set of accounts, you create extra steps:

• two iXBRL computation packages (or two tagged computations depending on software); • two sets of key dates; • two review cycles; and • two points where data must be finalised and approved.

If you are also filing statutory accounts, you need to make sure the sequencing is clear. For example, your tax computation may rely on final accounts figures, but the tax accounting periods might require earlier finalisation of part of the computation. If the accounts are delayed, you can end up filing returns close to deadline with higher risk of mistakes, or you may be tempted to file provisional figures and amend later, which is not always desirable and can create further administrative work.

In 2024/25, with many businesses operating lean finance teams, a seemingly simple year-end change can create recurring compliance overhead for a transitional year. That overhead is part of the “impact” and should be costed in time and adviser fees, not just in tax rate outcomes.

Profit allocation across periods: “just and reasonable” is not always “by days”

When an accounting period change creates multiple tax accounting periods, you have to allocate results across them. The default approach many people reach for is time apportionment: take the total profit for the accounts and allocate by the number of days in each tax period. This may be acceptable in many straightforward cases, but it is not always the best representation of the underlying economics.

Situations where a more tailored apportionment may be appropriate include:

• businesses with strong seasonal peaks (retail, hospitality, tourism); • project-based work where revenue recognition is lumpy; • companies that completed a major disposal, settlement, or restructuring in one part of the year; • property businesses with significant one-off dilapidations or lease incentives; and • finance-driven companies where loan interest and fair value movements are sensitive to market events in a short window.

In these cases, a blanket day-count could distort the allocation, potentially putting too much profit in one period and too little in another. That can affect the rate band in each period and could lead to different overall tax. It can also affect the use of losses, the availability of group relief, and the calculation of marginal relief. The safer approach is to consider whether the company’s accounting systems can produce management accounts or segmented results that support a more accurate allocation.

That said, complexity has a cost. The decision is not “always do something complex.” It is “use an approach that is defensible and proportionate.” For many small companies, time apportionment will still be reasonable. The impact of the accounting period choice is that you have to make this decision at all and document it.

Associated companies and threshold scaling: an often-missed complication

In a marginal relief environment, associated companies can reduce the profit thresholds that determine whether you pay the small profits rate, marginal relief rate, or main rate. For groups and owner-managed structures with multiple companies, this can turn accounting period planning into a multi-entity exercise.

If your company has associated companies during all or part of the period, the threshold calculations can change. When you change accounting periods, you might also change the period over which association is counted, especially if the ownership structure changes mid-year (for example, a new company is formed, an investment is made, or a company is sold). In these circumstances:

• the number of associated companies may be different across the two tax accounting periods; • the thresholds may need separate calculations for each period; and • profit allocation becomes even more sensitive because each period’s effective rate could differ.

This can be counterintuitive. A director might think “we have two companies now, so it’s the same impact whichever year end we choose.” But if the second company only existed for part of the year, or if control changed mid-year, the detailed calculation can differ between tax accounting periods. The accounting period choice can therefore influence how much of the year is measured under one associated-company count versus another.

In 2024/25, where many entrepreneurs operate multiple ventures through separate companies, this is a genuine planning point. It is not about aggressive tax avoidance; it is about avoiding accidental rate outcomes that arise because thresholds are scaled in ways you did not anticipate.

Losses: utilisation planning becomes more granular with short or split periods

Loss relief can be affected by accounting period choices because losses are computed and utilised by accounting period. If you have a loss in one period and profits in another, the way you carry losses back, carry them forward, or surrender them as group relief can depend on the sequencing and timing of accounting periods.

A change in year end can create a short period loss that would not have existed on a 12-month basis, or it can “trap” profits and losses in separate periods where relief options differ. For example:

• a short period with a one-off cost (such as professional fees for a transaction) could generate a loss that you might prefer to align with profitable periods; • splitting a long period can create a profit in one tax period and a loss in the next, influencing the timing of cash tax payments and refunds; • group relief is period-specific, so group planning may need more coordination when different companies have different year ends; and • restrictions on carried-forward losses and their utilisation can interact with the size of profits in each period, which is affected by apportionment.

From a practical standpoint, if you are considering a year-end change in 2024/25 and you expect significant volatility (a big contract, a restructuring, a disposal, or heavy investment), modelling losses across the prospective tax accounting periods can prevent surprises. Sometimes the most “accounting neat” year end is not the most cash-efficient year end for tax in a volatile year.

Reliefs and allowances: timing can change what you can claim and when

Many Corporation Tax reliefs and allowances follow the accounting period, including capital allowances claims, certain deductions, and relief regimes that rely on expenditure or activity within a period. When you shorten or split periods, you may need to consider how annual limits apply and how claims are prepared.

Capital allowances are a common example. While the rules for capital allowances are detailed and fact-specific, the general practical point is that when you create a short accounting period, some annual limits can be proportionally reduced, and the timing of expenditure becomes more prominent. If you were planning a large capital purchase, the difference between buying it just before or just after a year-end can affect when relief is obtained. When you change that year-end, you change that decision point.

Similarly, reliefs connected to innovation and development work can depend on when costs are incurred and how they are captured in the accounts and tax computation. A period change does not make genuine qualifying expenditure non-qualifying, but it can change the administrative process of identifying, documenting, and claiming it in one return versus two, or in a short period where finance teams are already stretched.

In 2024/25, with many businesses investing in technology, automation, and product development, the impact of accounting period choices is often felt as “how hard is it to evidence and compute our claim?” rather than “does the relief exist?” Splitting periods can double the documentation burden in a transitional year.

Group alignment and consolidation: the strategic case for changing year end

Despite the extra work, there are legitimate business reasons to change year end. Groups often want subsidiaries to align their accounting periods so that consolidated reporting is simpler, management information is consistent, and stakeholder communication is easier. When a subsidiary has a different year end, it can create problems:

• consolidation requires additional interim reporting; • auditing processes may become more complex; • banking covenants may be harder to track consistently; and • group tax planning, including group relief, may require more frequent adjustments.

In those cases, changing an accounting reference date can be the right call. The impact on Corporation Tax filings is the “one-off pain” of short or long periods, followed by ongoing efficiency. However, the transition year must be planned carefully. The group should map out:

• the number of Corporation Tax returns required during transition; • how profits and losses will be allocated; • whether associated company counts and thresholds change; and • whether any one-off transactions are expected that would make apportionment sensitive.

In 2024/25, where many groups are also dealing with wider compliance projects (for example, improvements to digital record-keeping, evolving reporting expectations, or lender-driven reporting), the timing of a year-end change can be chosen to avoid stacking too many projects in the same year.

New companies and first accounts: the hidden impact of a long first period

It is common for a newly incorporated company to set an initial accounting reference date that produces first accounts longer than 12 months. This can feel convenient: you get more time before preparing the first statutory accounts, and you can “bundle” early-stage activity into one reporting period.

But for Corporation Tax filings, this can create complexity from the outset. If the first accounts run, say, 15 months, you will have two Corporation Tax accounting periods. That means:

• two returns to prepare; • potentially two sets of rate/threshold calculations; • payment dates that might not match the founder’s expectations; and • a need to track transactions properly across the split.

For start-ups and owner-managed businesses in 2024/25, the risk is that compliance is underestimated at a time when the business is focused on growth. The founder may have budgeted for “one annual tax return” and is surprised by two. Additionally, early-stage businesses often have losses, grants, or investment-related transactions that require careful tax treatment. Splitting into two periods can make it harder to keep the narrative and documentation clear.

A shorter first period can sometimes reduce complexity, even if it means preparing accounts sooner. The “impact” here is that the accounting period choice at incorporation is not just an administrative preference; it sets the tone for your first tax compliance cycle.

Administrative systems: how your software and processes cope with period changes

Modern accounting and tax software is generally capable of handling short periods and split tax returns, but it still depends on how your finance function operates. When you change an accounting period, you may need to adjust:

• your bookkeeping cut-off procedures (accruals, prepayments, stock counts); • payroll and benefits reporting alignment; • VAT period reconciliation and how you explain differences between VAT and accounts turnover; • fixed asset registers and capital expenditure tracking; and • management reporting packs that are used for tax provisioning.

From a Corporation Tax filing perspective, the key administrative issue is data integrity across the split. If you are producing one set of accounts for 15 months but need two tax computations, you must be able to support the split figures. Many businesses do not routinely prepare detailed monthly management accounts that are audit-ready. They might rely on an annual “year-end push.” In that environment, splitting profits into two tax periods becomes harder and more judgement-based.

In 2024/25, where HMRC expects returns to be consistent and data-backed, a judgement-based split increases risk. This does not mean it is unacceptable; it means it should be prepared carefully, reviewed, and documented so that if questions arise later, you can explain how you arrived at the allocations.

Penalties and risk: period changes can increase the chance of avoidable errors

Most tax penalties are not triggered by changing your accounting period itself; they are triggered by late filing, late payment, inaccuracies, or failure to notify. However, changing an accounting period can increase the chance of these issues because it introduces “exception handling.” Finance teams are more likely to miss a deadline when there are two returns instead of one, or when the payment date shifts unexpectedly.

Common avoidable errors in transition years include:

• filing a return for the accounts period rather than for each tax accounting period; • using incorrect period start/end dates in the return; • applying annual thresholds without scaling for a short period; • forgetting to adjust for associated companies; • mis-apportioning profits in a way that is inconsistent with the underlying accounting records; and • missing the payment date because internal calendars were set up for the old year end.

In 2024/25, the practical impact is that companies should treat period changes as a mini-project with clear owners, a timeline, and checklists. Even small companies can benefit from a simple “tax dates sheet” that lists: period start and end dates, filing deadlines, payment deadlines, and who is responsible for each task. This is not bureaucracy; it is cheap insurance.

Choosing a year end: commercial drivers and tax consequences need to be balanced

It is tempting to choose a year end purely for tax reasons, but most businesses choose year ends for commercial reasons: seasonality, audit convenience, investor reporting cycles, and group alignment. The right approach is to align the year end with the business’s operating rhythm and then manage the tax consequences intelligently.

Commercial drivers that often influence year-end choice include:

• aligning year end after a seasonal peak so stock levels and accruals are easier to measure; • matching a parent company’s reporting date; • aligning with contract cycles or funding rounds; • choosing a quieter operational period to reduce the burden on staff; and • coordinating with external auditors’ schedules.

Tax consequences to consider alongside those drivers in 2024/25 include:

• whether the transition creates short or long tax periods and therefore multiple returns; • how thresholds for small profits and marginal relief may be affected; • how payment dates move and what that does to cash flow; and • whether expected one-off transactions should be captured in a particular period.

In many cases, the best decision is not “pick the year end that minimises tax this year.” It is “pick the year end that supports the business, then make sure the transition year is planned so that tax compliance is accurate and cash flow is predictable.”

Examples of how accounting period choices can change the 2024/25 filing experience

To make the impact more concrete, it helps to consider typical scenarios. The exact tax outcome always depends on facts, but the compliance and structural consequences are predictable.

Scenario 1: A company extends its accounts to create an 18-month period. The business wants to align with a new group year end. For statutory accounts, this is one set of accounts. For Corporation Tax, the company will have two accounting periods: the first 12 months and the final 6 months. That means two returns, two filing deadlines, and likely profit apportionment. Thresholds and rates are applied separately to each accounting period, with scaling for the 6-month period. Cash tax payment dates will relate to each period end, which can create a “double payment” feeling if not planned.

Scenario 2: A company shortens its accounts to a 9-month period. The business changes year end to better match seasonality. For Corporation Tax, there is one short accounting period. The company will file one return, but thresholds are scaled down for the 9-month period, which may push the company into marginal relief or main rate sooner than expected. The tax payment is due earlier in calendar terms because the accounting period ends sooner. Internal processes must handle an earlier year-end close.

Scenario 3: A start-up chooses a long first accounts period. The founders choose a convenient year end that produces 15-month first accounts. The company has early losses and some complex costs. For Corporation Tax, there are two accounting periods and two returns at a time when the business has little capacity for compliance. Loss computations, qualifying expenditure identification, and documentation must be split across two periods, increasing the work and the potential for inconsistencies.

Scenario 4: A business with multiple companies adds a new entity mid-year. The owner forms a new company for a second venture. Associated company counts affect thresholds. If the main company changes its accounting period around the same time, the threshold calculations might differ across the tax periods. The combined effect can change effective tax rates unexpectedly, even if profits do not change.

Practical steps to manage the impact in 2024/25

If you are considering changing an accounting period, or if you already have a non-standard period in 2024/25, there are practical steps that reduce risk and improve predictability.

Map the tax accounting periods early. Do not assume the period in the accounts is the period for tax. Confirm whether the 12-month rule will force a split. Create a simple timeline showing each tax accounting period and its start and end date.

List the filing and payment deadlines per period. Put the deadlines into a shared calendar with reminders. If you have two returns, make sure both are tracked and that responsibility is clearly assigned.

Model the profit allocation and thresholds. For short or split periods, estimate profits for each period and apply scaled thresholds. If you have associated companies, include them in the modelling. This is where surprises often occur.

Decide on an apportionment approach and document it. If time apportionment is used, record why it is reasonable. If a more tailored approach is used, keep management accounts or supporting schedules that show how figures were derived.

Plan around one-off events. If you expect a major disposal, settlement, financing event, or large capital expenditure, consider how the accounting period boundaries affect when it falls for tax. This can influence both the computation and the timing of cash tax.

Coordinate with advisers and software processes. If you use external accountants or tax advisers, make sure they are aware of the period change and the resulting number of returns. If you use software for tagging and submission, confirm it can produce separate packages per accounting period cleanly.

Review group alignment and associated company status. If you are in a group or common-control situation, check whether associated companies change during the period and how that interacts with thresholds when periods are short or split.

When a period change can be beneficial despite the extra work

It is easy to focus on the downsides: more returns, more apportionment, more dates to track. But there are circumstances where changing an accounting period can be genuinely beneficial from both a commercial and a tax administration standpoint.

Aligning with a parent or investor cycle. If your business is preparing for investment, aligning reporting dates can reduce due diligence friction and make your results easier to understand. That can have a value beyond any tax effect.

Reducing year-end pressure. Choosing a year end in a quieter part of the operational cycle can make the accounts close more accurate, which in turn makes the tax computation more robust. Fewer late adjustments often means fewer amended returns and fewer queries.

Improving the accuracy of forecasting and provisioning. If management reporting and budgeting are built around a particular cycle, aligning the statutory and tax reporting periods can improve the quality of tax forecasts and reduce the risk of late payment interest due to mis-estimation.

Simplifying group relief and internal reporting over the long run. The transitional year might be messy, but once aligned, group processes can become simpler and more consistent. For groups, that can reduce ongoing professional fees and internal time spent reconciling period mismatches.

Key takeaways for 2024/25

Accounting period choices have a real impact on UK Corporation Tax filings in 2024/25 because the system is sensitive to timing, period length, thresholds, and associated company status. A year-end decision is not just a Companies House administrative detail. It can change how many returns you file, when you pay tax, and how complex the computation becomes.

The most important practical points are: