Newly self-employed: a 31 March year end saves a calculation

If you have just gone self-employed, choose 31 March or 5 April as the end of your accounting year unless you have a strong reason not to. Sole traders are now taxed on the profit of the tax year itself. Any other year end means splitting two sets of accounts on every tax return, and sometimes filing on estimates.

What changed

Until April 2023, a sole trader was taxed on the accounts that ended in the tax year, whatever the date. That rule has gone. HMRC's guidance on the new tax year basis says that from 6 April 2024 you report the profit you earned between 6 April and the following 5 April.

Accounts that end on any day from 31 March to 5 April are treated as matching the tax year. Anything else has to be apportioned. HMRC's own advice is that you may find it easier to prepare your accounts to 31 March or 5 April, because you will not need to use two sets of accounts.

What a December year end looks like

Illustration, not a real person. Mia starts as a freelance photographer in Wembley on 1 January 2026 and picks 31 December as her year end, to match the calendar. Her profit is £24,000 for 2026 and £36,000 for 2027.

Her first return, for 2025 to 2026, already takes 95 days of her 2026 accounts, £6,247. Her second, for the tax year 6 April 2026 to 5 April 2027, has to combine two sets of accounts. HMRC's normal method is by days:

• 6 April to 31 December 2026 is 270 days of her 2026 accounts: £24,000 × 270 ÷ 365 = £17,753.

• 1 January to 5 April 2027 is 95 days of her 2027 accounts: £36,000 × 95 ÷ 365 = £9,370.

Her taxable profit for 2026 to 2027 is £27,123. That return is due on 31 January 2028, one month after her 2027 accounts close. If they are not finished by then, HMRC says she must estimate the profit, file provisional figures and amend the return once the accounts are done.

Had Mia chosen 31 March, her 2026 to 2027 profit would simply be the profit in her accounts for the year to 31 March 2027, with ten months to finish them before the deadline. Every later year works the same way.

The first period

A year end does not have to fall a full year after you start. Someone who starts in January can make up a short first set of accounts to 31 March, then run April to March from then on. The first return covers the months up to 5 April, and the books line up with the tax year from then on.

HMRC lets you apportion by days, weeks or months, as long as the method is reasonable and you use it consistently. That flexibility is useful if you are already on another date. It is simpler never to need it.

Other first-year dates

• Register for Self Assessment by 5 October after the end of the tax year in which you started.

• File online and pay by 31 January after that tax year ends.

• Expect the first January bill to include a payment towards the next year as well, unless your tax was under £1,000 or more than 80 per cent of it was collected through a payslip.

Our page for sole traders covers how we set up the books for a new business, and our guide to basis period reform explains apportionment for anyone already on another date. Pick the date before your first set of accounts is drawn up. It is the easiest decision of the year to get right early.

About the author

Harvey Dhillon is Founder and CEO of Zmartly, an accountancy firm for small businesses. He grew up in West London and began his career in finance at Barclays, in investment banking and wealth management, before going full-time on Zmartly in 2020.

Featured photo by Caio on Pexels.