Fiscal year - What is a fiscal year?
A fiscal year is a 12 month period in which businesses, governments, and other organisations base their financial reporting and budgets.
Did you know that you can change your financial year-end with Companies House? Read more on our blog: ‘Need more time to file accounts? Changing your year-end’.
The fiscal year may differ based on the business and could run from any one year period. For instance, schools begin their fiscal year based on the school year rather than the calendar year. Fiscal years are generally decided based on the nature of the business and their accounting processes.
What is a fiscal year used for?
A fiscal year is generally used for tax and financial reporting purposes. However, it can also be used to compare trends, set budgets, and make management decisions.
Businesses will need to prepare statements for their fiscal year-end to submit to government authorities as well as investors or shareholders.
What is the difference between a fiscal year and an accounting year?
An accounting year is the period in which a business organises its financial statements for tax purposes.
A fiscal year, on the other hand, is set by the business to correspond to business operations and set budgets, compare trends from previous years, and gather financial information.
In the majority of cases, businesses have the same accounting year and fiscal year, however, this is not always the case.
In the UK, the accounting year typically starts on April 6th and ends on April 5th. A businesses fiscal year may be a different 12 month period based on the nature of the business and its revenue cycles.
Fiscal year when starting a business
When you are just starting a business, your fiscal and accounting years may be different periods and may be shorter or longer than 1 year.
You can check your accounting year by signing into your HMRC business tax account. If your fiscal year is different from these dates, it can be changed or kept separate.
The reason your accounting year may be longer in the first year of business is that it starts on the day your company is set up. You may have to submit 2 tax returns in this case. If it is shorter than 12 months, you will just need to submit 1 tax return.
After the first year of business, you can match up your accounting year and fiscal year if you wish to ensure that everything is synchronised. After the first year of business, the accounting and fiscal year must be no longer than 12 months.
Invoicing software and your business fiscal year
In most cases, your fiscal year and accounting year will be the same. If this is the case, using invoicing software can help you prepare your financial documents and provide the information you need to set budgets.
With Debitoor, the system does the majority of the work for you. As soon as you create an invoice or record an expense, your accounting reports will automatically be updated. These reports, like the balance sheet and the profit and loss statement, will help you complete your Company Tax Return.
You can easily set your accounting year and fiscal year using the filters on the reports tab to gather information, compare trends from previous years, and provide information to investors and shareholders.