The calendar year
This is perhaps the most obvious calendar businesses need to consider. The calendar year is the time it takes for the Earth to make one revolution around the sun. It generally refers to the 12-month period that begins on 1 January and ends on 31 December. This calendar year is based on the Gregorian calendar, which has been adopted by all but 4 countries (Afghanistan, Iran, Ethiopia and Nepal).
Businesses typically divide the calendar year into the following 4 quarters:
the first quarter (Q1) - 1 January to 31 March
the second quarter (Q2) - 1 April to 30 June
the third quarter (Q3) - 1 July to 30 September
the fourth quarter (Q4) - 1 October to 31 December
The tax year
The UK tax year (also referred to as the ‘financial year’ or ‘fiscal year’) refers to the 12-month period used for handling tax affairs (eg pay income tax or requests for tax refunds).
The tax year runs from 6 April each year to 5 April in the following year.
Tax allowances (eg your personal allowance, self-employment trading allowance and ISA allowance) and pension tax reliefs all follow the tax year. As these types of allowances typically cannot be carried over into the following tax year, it is important that you use them in a given tax year so as not to lose them. Benefits (eg state pension rates) and statutory payments (eg statutory sick and maternity pay) also tend to increase with the new tax year.
It is important that everyone knows when the tax year ends, as this helps with budgeting and meeting tax payment deadlines. Anyone who misses a tax deadline may incur penalties or miss out on rebates owed.
Self-employed people and self-assessment tax returns
The tax year is of particular importance to anyone who is self-employed (ie sole traders) or who makes an income above a certain threshold from a secondary source (eg from a side hustle or renting out a spare room in their home). This is because the tax year is the period used to report income and expenses and, therefore, to calculate the income tax due. For more information on income tax, read Income tax in England and Wales and Income tax in Scotland.
Anyone earning an income from self-employment (or a source other than employment) must file a self-assessment tax return with HMRC. With regard to self-assessments, sole traders need to know the following deadlines:
5 October - the deadline for telling HMRC that a self-assessment must be completed (if this hasn’t been done before)
31 October - the deadline for submitting a paper tax return for the previous tax year
31 January - the deadline for submitting an online tax return for the previous tax year
31 January - the deadline for paying all taxes owed (late payments will incur a fine)
For more information, see the government’s guidance on self-assessment tax returns.
The company year and accounting reference dates
Whenever a private limited company (LTD) is registered, Companies House issues an ‘accounting reference date’ (ARD). An ARD may also be called a company’s ‘year end’. Every year, companies have to file accounts and pay corporation tax for the previous financial year. These usually relate to the 12-month period up to the last accounting reference date.
A company’s initial ARD is the last day of the month in which the company was registered (starting the year after it was registered). For example, if a company was incorporated on 11 January, its initial ARD is 31 January and its first company year will end on 31 January the following year.
Can I change my company's ARD?
Should I change my company's ARD?
This will depend on your business. Corporation tax is due 9 months and 1 day after the ARD. Your company must have sufficient cash to pay its tax liabilities.
Most companies choose either 31 March or 31 December as their ARD.
31 March fits in with the governmental financial year and is also before the income tax and payroll tax year end (5 April). The last date for paying corporation tax (if the ARD is 31 March) is 31 December. This may be attractive for companies planning to pay tax using Christmas takings. That being said, due to the popularity of this date, accountants may be busy and take longer than usual to prepare accounts. Companies leaving accounts until the last minute may incur penalties if there are delays over the Christmas period.
31 December is a suitable date for companies with a strong Christmas sales period that need to show a strong balance sheet in company accounts (eg for financing purposes). However, as with 31 March, this date is very popular and any accounting work would need to fit around Christmas and New Year.
The governmental financial year
The UK government’s financial year runs from 1 April each year to 31 March the following year. All government accounts are made up to this date.
Importantly, for companies, the end of the corporation tax year is in line with the governmental financial year (ie 31 March). This means the government may change the corporation tax rates on 1 April. As a result, if a company’s ARD is different to 31 March, the company’s taxable profits have to be apportioned to the appropriate period at the relevant corporation tax rate.
Cultural and religious calendars
As the world becomes increasingly global and diverse, businesses should familiarise themselves with different cultural and religious calendars. Due to their background or religion, an employee may have other working practices and times that they take time off work. Similarly, businesses may be open and closed at different times.
From an employment perspective, staff members with different cultural and religious backgrounds may celebrate different holidays and request to take time off at different times. Employers should take an open and understanding approach. Adopting a clear Annual leave policy is a good starting point for this.
From a business perspective, understanding different cultural and religious calendars is crucial for navigating different markets, establishing meaningful connections with diverse customer bases, and avoiding cultural misunderstandings that could potentially harm business relationships.
Examples of some cultural and religious calendars and significant cultural and religious dates businesses should be aware of include:
The Islamic calendar
The Islamic calendar (also known as the ‘Muslim’, ‘Lunar’ or ‘Hijri’ calendar) determines the proper days of Islamic holidays and rituals. For example, Ramadan, Eid al-Adha and Hajj.
For example, in Islam, Ramadan is considered one of the most spiritual times and involves (most notably) fasting, prayer, charity and community connection. Employers should bear this in mind when working with Muslim staff members. Things to consider include:
offering flexible working patterns (eg allowing earlier starts and finishes, forgoing lunch breaks for an earlier finish, and scheduling all meetings during core working hours)
understanding that holiday requests to celebrate Eid al-Fitr (which marks the end of Ramadan and which depends on the sighting of the new moon) may be submitted at short notice
trying not to schedule work lunches during Ramadan
The Hebrew calendar
The Hebrew calendar (also referred to as the ‘Jewish calendar’) determines the dates of Jewish holidays and rituals. For example, Rosh Hashanah, Yom Kippur, Passover and Hanukkah.
Businesses should also familiarise themselves with Shabbat (or ‘Shabbath’). In Judaism, this is the day of rest, which starts at sunset on Fridays and ends at sunset on Saturdays. Observing Shabbat involves refraining from various work activities (eg cooking and driving). The degree to which Shabbat is observed depends on denominations, personal beliefs and practices.
Businesses should bear this in mind when working with other businesses and when managing staff members who may, for example, ask to leave work early on Fridays to be home in time for Shabbat.
Lunar New Year celebrations
Lunar New Year (also referred to as ‘Chinese New Year’) is one of the most important celebrations amongst East and Southeast Asian cultures. It usually takes place in late January or February, which tends to be a busy period for many businesses. It is crucial that businesses understand that staff members may ask for time off at this time and that businesses active in countries that celebrate Lunar New Year may be slower or come to a halt altogether.
Hinduism has many important festivals that are celebrated as national holidays in Hindu countries. Two of the most important Hindu festivals are Diwali and Holi.
It is vital that businesses understand how different cultural and religious practices and celebrations may affect them. This is of particular importance when managing staff members from different backgrounds as care must be taken not to discriminate. Ask a lawyer if you have any questions or concerns.