Fiscal Year vs Financial Year: The UK Difference

"Fiscal year" and "financial year" sound like the same thing. In the UK, they aren't, and mixing them up can cost you time at year-end or, worse, leave you working from the wrong tax rates.

Here's the short version. The fiscal year (the tax year) runs 6 April to 5 April and governs your Income Tax. The financial year runs 1 April to 31 March and governs Corporation Tax. They sit five days apart, and which one matters depends on whether you trade as an individual or through a limited company.

This guide explains each term, shows the dates side by side, and helps you choose an accounting year-end that keeps your tax simple. It's written for UK sole traders, partnerships and company directors.

What's the difference between a fiscal year and a financial year?

In everyday speech people use the two terms loosely. In UK tax, they point at two different periods.

• Financial year: 1 April to 31 March. It's the period the government uses to set Corporation Tax rates, so it matters mainly to limited companies.
• Fiscal year (tax year): 6 April to 5 April. It's the period HMRC uses to assess Income Tax and Class 4 National Insurance, so it matters to individuals, sole traders and partners.

The practical upshot is simple. If you pay Corporation Tax, watch the financial year. If you pay Income Tax through Self Assessment, watch the fiscal year. Plenty of business owners deal with both, which is exactly why the distinction is worth nailing down.

What is the financial year in the UK?

The financial year is the 12-month period the government uses for Corporation Tax. It runs from 1 April to 31 March the following year, and it's named by the year it starts in. So Financial Year 2025 (FY2025) runs from 1 April 2025 to 31 March 2026.

When a Budget changes Corporation Tax, the new rate usually takes effect from 1 April, at the start of the next financial year. For FY2025 and FY2026 the rates are unchanged:

Marginal relief between the two limits uses the standard fraction of 3/200. These figures are from gov.uk's Corporation Tax rates and marginal relief guidance and apply across both financial years.

What is the fiscal year, or tax year?

In the UK, "fiscal year" is just another name for the tax year. It runs from 6 April to 5 April, and it's the period HMRC uses to work out Income Tax, National Insurance and other personal taxes.

So the 2025/26 tax year runs from 6 April 2025 to 5 April 2026, and 2026/27 runs from 6 April 2026 to 5 April 2027.

At the start of each tax year, rates and allowances can change. For 2025/26 the headline personal figures are:

The Personal Allowance is £12,570 for both 2025/26 and 2026/27. It tapers away once your adjusted net income passes £100,000, falling by £1 for every £2 above that, and reaching nil at £125,140. Self-employed profits also attract Class 4 National Insurance: 6% on profits between £12,570 and £50,270, then 2% above, for both 2025/26 and 2026/27.

What is an accounting year, and how is it different?

Here's the part that trips people up. The financial year and the fiscal year have fixed dates set by law. Your accounting year is the 12-month period you actually draw up your accounts to, and that one is largely your choice.

The end date is your accounting reference date, often just called your year-end. For a new limited company, Companies House sets a default: the last day of the month you incorporated in, a year later. Incorporate on 15 June 2025 and your first year-end defaults to 30 June 2026. You can change it.

Your accounting year decides when your accounts are due, when your tax falls, and how cleanly your figures line up with the tax year. The closer it sits to the fiscal or financial year, the less apportionment you'll do.

Fiscal year vs calendar year: what's the difference?

A calendar year is the ordinary one: 1 January to 31 December. The UK tax year isn't aligned to it, which is the source of a lot of confusion.

A UK business can easily juggle three periods at once: Self Assessment on the fiscal year, Corporation Tax rates on the financial year, and VAT returns on calendar quarters if that's the stagger it chose. That's normal. It just means keeping clear which obligation follows which clock.

Why does the UK tax year start on 6 April?

It's a quirk of history. The old tax year began on Lady Day, 25 March. When Britain switched from the Julian to the Gregorian calendar in 1752, 11 days were dropped to realign the calendar, and the Treasury moved the year-end forward to keep a full year's tax, landing on 5 April. A later leap-year adjustment nudged the start to 6 April, where it has stayed ever since.

The takeaway for planning: Corporation Tax rates change on 1 April, Income Tax rates on 6 April. If a company's accounting period straddles 1 April and rates have moved, profits get apportioned across the two financial years.

How does this work for limited companies?

Your company pays Corporation Tax on its profits, using the rates for the financial year (or years) its accounting period falls in. Corporation Tax is due nine months and one day after the end of your accounting period.

Many companies set a 31 March year-end so it lines up with the financial year. The benefit is real:

• Only one set of Corporation Tax rates applies to the period.
• No apportioning profits across two financial years if rates change.
• Cleaner accounts and a simpler tax computation.

Illustrative example. A company has an accounting year-end of 31 March 2026 and taxable profits of £40,000. That's below the £50,000 small profits limit, so the whole lot is taxed at 19%: a Corporation Tax bill of £7,600, due on 1 January 2027 (nine months and one day after 31 March 2026). If the same company used a 31 December year-end instead, its period would span two financial years, and it would have to split the profit across them, even when the rate is the same in both.

You can change your year-end through Companies House. You can shorten a period whenever you like, but you can normally only extend once every five years, up to a maximum 18-month period. Our corporation tax services can model the change before you commit to it.

How does this work for sole traders and partnerships?

You don't pay Corporation Tax, so the financial year doesn't apply to you. Your key date is the fiscal year: 6 April to 5 April.

Since the basis period reform took effect from 6 April 2024, sole traders and partnerships are taxed on the profits arising in the tax year itself, not on the profits of whatever accounting year happens to end during it. If your accounting year doesn't match the tax year, you have to apportion.

Illustrative example. Emma is a sole trader with a 31 December year-end who hasn't aligned to the tax year. Her accounts show £42,000 profit for the year to 31 December 2025 and £48,000 for the year to 31 December 2026. To work out her 2025/26 taxable profit (6 April 2025 to 5 April 2026) she splits it in two: - 6 April to 31 December 2025 (270 days): £42,000 × 270/365 = £31,068 - 1 January to 5 April 2026 (95 days): £48,000 × 95/365 = £12,493 - Total taxable profit for 2025/26: £43,561 She'll repeat that apportionment every year, often using estimates for the second accounting period until the final figures land. Had she moved her year-end to 31 March, her accounts for the year to 31 March 2026 would simply be her taxable profit for 2025/26, with no apportionment at all.

That's why, for most sole traders and partners, the sensible accounting year-end now is 31 March or 5 April. If you're weighing it up, our self-assessment services and the self-employed tax calculator are good starting points.

A note on the changeover: 2023/24 was the transition year for these rules. Businesses whose old basis period left extra "transition profit" can spread that additional charge over five tax years, from 2023/24 to 2027/28, with at least 20% taxed in 2023/24, unless they elect to accelerate it.

How does Making Tax Digital change things from 2026?

Making Tax Digital (MTD) for Income Tax is being phased in, and it makes aligning your accounting year-end with the tax year more valuable than ever.

Under MTD for Income Tax you keep digital records and send quarterly updates to HMRC using compatible software, then a final declaration by 31 January after the tax year ends. The phased thresholds, based on qualifying income, are:

The quarterly update periods run with the tax year (6 April to 5 July, and so on). If your accounting year-end matches the tax year, your quarters line up and reporting is straightforward. If it doesn't, you'll be reconciling two sets of figures every quarter. One more reason to consider moving to a 31 March or 5 April year-end before the rules bite.

How do I choose the right accounting year-end?

For limited companies, 31 March is the default sensible choice: it matches the financial year, so one set of Corporation Tax rates applies and there's no apportionment. Other dates can suit a seasonal business or a group that has to align with a parent, but they add complexity if rates change.

For sole traders and partnerships, 31 March or 5 April is almost always best after basis period reform. It matches the tax year, removes apportionment, and keeps MTD simple.

Whichever you pick, sense-check the cash flow. List when each bill falls, Corporation Tax (nine months and one day after year-end), Self Assessment (31 January), VAT and any PAYE, and make sure they don't all cluster in the same fortnight.

Want help picking a year-end that keeps your tax simple? Talk to a Zmartly accountant and we'll model the options for your business before you change anything.

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