If you've ever wondered why your Corporation Tax rate changed part-way through your company's accounting period, or why the dates covered by your company's accounts don't match the UK tax year, the answer usually comes down to the difference between a financial year and an accounting period.
Although these terms are sometimes used interchangeably, they mean different things.
The financial year is a period set by the government for tax purposes, while your company's accounting period is the period covered by its financial statements and Corporation Tax Return.
Understanding the difference is important because your company's accounting period can overlap more than one financial year. When this happens, different Corporation Tax rates or tax rules may apply to different parts of the same accounting period.
In this guide, we'll explain:
- What a financial year is
- What an accounting period is
- The difference between a financial year and accounting period
- How Corporation Tax financial years work
- What happens if your accounting period is longer than 12 months
- How to change your company's accounting period
What is a Financial Year?
A Financial Year, sometimes called a 'fiscal year', is a fixed 12-month period set by the UK government during which any changes to tax policy take effect. This includes updates to tax rates, allowances and reliefs, most of which stem from legislation introduced in each year's Finance Act.
It's worth noting that the Financial Year isn't the same across every type of tax. Corporation Tax and Income Tax each run to their own calendar:
Corporation Tax Financial Year – runs from 1 April to 31 March. This is the period relevant to limited companies, since it determines when any changes to Corporation Tax policy come into force.
Income Tax Financial Year – runs from 6 April to 5 April the following year. This is the period HMRC uses to calculate the Income Tax owed by individuals, based on all income received within it.
What is an Accounting Period?
An Accounting Period is the specific window of time your limited company reports on for a given return. It's not fixed by the calendar in the same way a Financial Year is; instead, it's tied to your company's own dates.
Two of the main returns that rely on an Accounting Period are your Annual Accounts submitted to Companies House and your Corporation Tax Return (CT600) submitted to HMRC.
For your CT600, HMRC will confirm your Accounting Period in a 'Notice to Deliver a Company Tax Return', sent once your filing is due. For example, this might state your Accounting Period as 1 January 2025 to 31 December 2025. Most often, it is related to the date your company was incorporated.
In most cases, an Accounting Period covers 12 months, but company directors can choose to shorten or extend it. Companies most commonly do this to align future Accounting Periods with the Financial Year, or to bring multiple companies within a group onto the same reporting dates.
What is the difference between financial year and an accounting period?
| Financial Year | Accounting Period |
| Set by the government | Determined by your company's reporting dates |
| Used to determine when tax rules and rates apply | Determines the period covered by your company's accounts or tax return |
| Corporation Tax financial year runs from 1 April to 31 March | Usually covers 12 months, although it can be shorter or, for company accounts, longer |
| Applies consistently across companies | Can differ between companies |
| Can contain part of, or overlap with, your accounting period | Can span more than one financial year |
Why does my Corporation Tax rate change during my accounting period?
One of the most common reasons is that your accounting period crosses the 1 April Corporation Tax financial year boundary. Corporation Tax rates are set by reference to financial years, whereas your company can have an accounting period starting on a different date.
Where an accounting period falls across two Corporation Tax financial years, the applicable tax rates may need to be apportioned between the relevant periods.
For example, if your company's accounting period runs from 1 January to 31 December and the Corporation Tax rate changes from 1 April, the Corporation Tax calculation will need to take account of the period before and after the rate change.
This does not necessarily mean that your company has changed tax rates unexpectedly. It is often simply because your accounting period overlaps two financial years.
Changing Your Accounting Period
You can change your company's Accounting Period at any time, up to a maximum length of 18 months. This is managed separately with each authority:
- Changing your Accounting Period with Companies House
- Changing your Accounting Period with HMRC
- What Happens if Your Accounting Period is Extended?
If your Accounting Period with HMRC runs longer than 12 months, you'll need to submit two separate CT600s. HMRC's CT600 form only covers periods of up to 12 months at a time, so where an Accounting Period is extended, income and expenditure must be apportioned across both returns.
For example, if your Accounting Period runs from 15 November 2024 to 30 November 2025, your two CT600s would be dated:
First CT600: 15 November 2024 to 14 November 2025
Second CT600: 15 November 2025 to 30 November 2025
While the CT600s themselves are split, your company accounts don't need to be. They can cover the entire Accounting Period requested by HMRC, so in the example above, your accounts would run from 15 November 2024 through to 30 November 2025.
Financial Year vs Accounting Period: The Key Difference
In short: the Financial Year is set by the government and determines when tax rules change. Your Accounting Period is set by your company and determines what dates your return covers. Your Accounting Period can fall entirely within one Financial Year, or straddle two, which is often why a single Corporation Tax Return might need to apply more than one tax rate.
Looking for Further Information?
Hopefully this article has cleared up the difference between a Financial Year and an Accounting Period, and how the two work together when it comes to your company's filings. For more guidance on staying compliant, take a look at our Knowledge Base, or get in touch with our team if you have questions about company formation or ongoing filings.
