End of Year Accounts: What They Are and How to File Them in the UK

At Towerstone Accountants we provide specialist small business accountancy services for owners, directors, and growing businesses across the UK. We created this webpage for small business owners and managers who want clear explanations of accounting terms, processes, and concepts they may encounter when running a business. Our aim is to make financial language easier to understand, and help you make better informed decisions with confidence.

End of year accounts are one of those things every business owner knows they are supposed to deal with, but many do not fully understand. For some, they feel like a box ticking exercise that only matters to HMRC or Companies House. For others, they are a source of stress, confusion, or last minute panic. In reality, end of year accounts are far more than a compliance task. They are a summary of how your business has actually performed and a foundation for many important financial decisions.

In my experience as a chartered accountant working with small businesses, directors, and self employed individuals, most problems around end of year accounts do not come from complexity. They come from lack of clarity. People are unsure what is included, what the accounts are used for, what deadlines apply, and why figures often look different from what they expected.

In this article, I want to explain clearly what end of year accounts are, why they matter, what they include, how they are prepared, and what business owners should be paying attention to. This is written in plain UK English, grounded in real world practice, and aimed at helping you feel confident rather than overwhelmed.

What Are End of Year Accounts

End of year accounts are financial statements prepared at the end of an accounting period, usually covering twelve months of trading. They summarise the financial activity of a business over that period and show its financial position at the end.

They are sometimes called:

• Annual accounts

• Statutory accounts

• Final accounts

The exact format and requirements depend on whether you are a sole trader, a partnership, or a limited company, but the underlying purpose is the same.

End of year accounts exist to show a true and fair view of the business.

Why End of Year Accounts Matter

It is easy to think end of year accounts only exist because the law requires them. While compliance is part of the picture, their importance goes much further.

End of year accounts are used to:

• Calculate tax liabilities

• Demonstrate compliance with UK law

• Support mortgage or loan applications

• Assess profitability and performance

• Inform business planning decisions

They are one of the few points in the year where everything is pulled together and reviewed as a whole.

Who Needs to Prepare End of Year Accounts

Almost every business needs some form of end of year accounts.

This includes:

• Sole traders

• Partnerships

• Limited companies

• Landlords with rental businesses

The level of detail and format varies, but the obligation to account for income and expenses does not disappear simply because a business is small.

Limited companies have the most formal requirements, as their accounts are filed with Companies House as well as HMRC.

What End of Year Accounts Usually Include

While formats vary, end of year accounts generally include two core statements.

These are:

• A profit and loss account

• A balance sheet

Together, they tell the story of how the business performed and where it stands financially.

Additional notes and disclosures may also be required, particularly for limited companies.

The Profit and Loss Account Explained

The profit and loss account shows what the business earned and spent over the accounting period.

It starts with income, then deducts expenses, to arrive at a profit or loss.

This is where many business owners focus, because profit often feels like the headline figure.

However, profit is not cash. It is an accounting measure that reflects performance, not bank balance.

The profit figure is critical because it is usually the starting point for calculating tax.

The Balance Sheet Explained

The balance sheet shows the financial position of the business at a specific point in time, usually the last day of the accounting period.

It lists:

• Assets, such as cash, debtors, and equipment

• Liabilities, such as creditors, loans, and tax owed

The balance sheet answers the question, what does the business own and what does it owe at this moment.

For limited companies, the balance sheet is a legal statement that directors must approve.

Why the Balance Sheet Often Confuses People

Many business owners find the balance sheet confusing because it does not match their intuitive sense of money.

This is often because:

• It includes amounts not yet paid or received

• It reflects accruals and prepayments

• It includes tax liabilities not yet settled

Understanding the balance sheet helps explain why profit and cash are not the same thing.

Accruals and Adjustments in End of Year Accounts

End of year accounts are almost always prepared on an accrual basis, especially for limited companies.

This means income and expenses are recorded in the period they relate to, not when cash moves.

Common adjustments at year end include:

• Accruing unpaid expenses

• Deferring income received in advance

• Accounting for depreciation

• Adjusting for stock

These adjustments are why end of year figures often differ from bookkeeping reports run during the year.

Why End of Year Accounts Look Different From Your Bank Balance

One of the most common questions I hear is why the profit in the accounts does not match the money in the bank.

This difference exists because:

• Some income has been earned but not yet paid

• Some costs have been incurred but not yet paid

• Tax has been provided for but not paid

• Capital spending is treated differently

End of year accounts reflect economic reality, not just cash movement.

End of Year Accounts for Sole Traders

For sole traders, end of year accounts are usually prepared to support the Self Assessment tax return.

They show:

• Total income for the year

• Allowable business expenses

• Net profit or loss

These figures are then used to calculate Income Tax and National Insurance.

Sole trader accounts are not filed publicly, but they must be accurate and supported by records.

End of Year Accounts for Limited Companies

Limited companies have more formal requirements.

They must prepare statutory accounts that comply with UK accounting standards and file them with:

• Companies House

• HMRC

These accounts include:

• A profit and loss account

• A balance sheet

• Notes to the accounts

Smaller companies can file abbreviated versions publicly, but full accounts are still required for HMRC.

Director Responsibilities Around End of Year Accounts

Directors are legally responsible for the accuracy of company accounts.

Even if an accountant prepares them, directors must approve and sign them.

This means directors should understand the broad figures and be comfortable that the accounts reflect reality.

Signing accounts without understanding them is risky.

Deadlines for End of Year Accounts

Deadlines depend on business structure.

For limited companies:

• Accounts must usually be filed at Companies House within nine months of the year end

• Corporation Tax returns must be filed within twelve months

• Corporation Tax is usually payable nine months and one day after the year end

For sole traders:

• Accounts support the Self Assessment return

• The return is usually due by 31 January following the tax year

Missing deadlines leads to penalties and interest.

Why First Year Accounts Are Often Tricky

First year accounts often cause confusion because:

• The accounting period may not match the tax year

• There may be startup costs before trading began

• There is no prior year for comparison

This makes professional guidance particularly valuable in the first year.

What Records Are Used to Prepare End of Year Accounts

End of year accounts are only as good as the records behind them.

Common records include:

• Bank statements

• Sales invoices

• Purchase invoices and receipts

• Payroll reports

• Loan statements

Poor records lead to delays, stress, and sometimes inaccurate accounts.

Why Good Bookkeeping Makes End of Year Accounts Easier

Good bookkeeping throughout the year transforms the end of year process.

When records are up to date and reconciled:

• Accounts are quicker to prepare

• Adjustments are clearer

• Costs are lower

• Fewer questions arise

End of year accounts should not feel like a forensic investigation.

Tax and End of Year Accounts

End of year accounts are the starting point for tax calculations.

For sole traders, profit feeds into Income Tax and National Insurance.

For companies, profit feeds into Corporation Tax, adjusted for tax specific rules.

This is why accurate accounts matter. Errors flow straight into tax.

Why End of Year Accounts Are Not Just for HMRC

While tax is a major reason accounts exist, they also serve the business owner.

End of year accounts help you:

• See whether the business is truly profitable

• Identify rising costs

• Understand margins

• Spot cash flow risks

• Plan for the future

Ignoring the information in your accounts is a missed opportunity.

Comparing Year on Year Performance

One of the most valuable uses of end of year accounts is comparison.

Looking at this year versus last year helps identify trends.

This might include:

• Growing revenue

• Shrinking margins

• Rising overheads

• Improved efficiency

Without consistent accounts, these insights are lost.

Common Misunderstandings About End of Year Accounts

Some common misconceptions include:

• If there is no profit, accounts do not matter

• If cash is tight, the accounts must be wrong

• Accountants change numbers arbitrarily

• Accounts only exist for tax

None of these are true, but they are common sources of frustration.

What Happens After End of Year Accounts Are Finalised

Once end of year accounts are completed:

• Tax returns are submitted

• Tax liabilities are confirmed

• Accounts may be filed publicly

• Figures can be used for planning

This is also a good time to review pricing, costs, and strategy.

End of Year Accounts and Business Planning

End of year accounts provide a natural pause point.

They are an opportunity to ask:

• What went well

• What did not

• Where are costs increasing

• Is the business sustainable

Using accounts this way turns compliance into insight.

The Role of an Accountant in End of Year Accounts

An accountant does far more than compile figures.

They:

• Apply accounting standards correctly

• Make necessary adjustments

• Ensure compliance with HMRC and Companies House

• Explain results in context

A good accountant also highlights risks and opportunities hidden in the numbers.

Why Last Minute Accounts Cause Problems

Leaving accounts until the last minute increases stress and risk.

Common issues include:

• Missing records

• Rushed decisions

• Missed reliefs

• Cash flow surprises

Early preparation allows time for questions and planning.

What Happens if End of Year Accounts Are Wrong

Incorrect accounts can cause serious problems.

These include:

• Incorrect tax bills

• HMRC enquiries

• Misleading financial decisions

• Legal issues for directors

Accuracy matters, even for small businesses.

How Long End of Year Accounts Should Be Kept

Business records and accounts must usually be kept for several years.

This applies even after a business closes.

HMRC can review past periods within certain time limits.

Proper record keeping protects you.

Why Understanding Your End of Year Accounts Matters

You do not need to become an accountant, but understanding the basics of your own accounts is empowering.

It allows you to:

• Ask better questions

• Spot issues earlier

• Make confident decisions

• Reduce anxiety around money

Understanding replaces fear.

Final Thoughts

End of year accounts are not just a legal requirement. They are a summary of your business story over the past year.

When prepared properly, they bring clarity, support compliance, and provide insight that can guide better decisions. When misunderstood or ignored, they become a source of stress and missed opportunity.

Whether you are a sole trader or a company director, engaging with your end of year accounts, even at a high level, is one of the most valuable things you can do as a business owner.

Clarity around your numbers leads to confidence, and confidence leads to better business outcomes.

You may also find our guidance on substituted accounting period and what is business turnover useful when exploring related accounting topics. For a wider collection of plain English explanations, you can visit our knowledge hub.