One of the most common surprises new business owners get is finding out they need to submit two corporation tax returns in their first year – even though they’ve only got one set of accounts. Sounds a bit daft, right?
But don’t worry – there’s a reason for it (thanks, HMRC…), and once you understand why it happens, it’s not quite as confusing as it first seems.
Yep, it’s not just you. And yes, it’s totally normal.
So, Why Do I Have to Do Two Returns?
When you first set up your company, Companies House will set your first accounting period – usually it’ll run from the day you incorporated right through to the end of the same month the following year.
BUT (and it’s a big but) – HMRC only allows one corporation tax return to cover a maximum of 12 months. So if your first accounts cover more than a year (which they often do), you’ll need to split the tax bit into two:
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One return for the first 12 months of trading
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A second return for the extra days between the end of that 12 months and your accounting year-end
Let’s say you set up your business on 1st January 2024, and your year-end is 31st January 2025. You’d have:
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Return 1: 1st Jan 2024 – 31st Dec 2024
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Return 2: 1st Jan 2025 – 31st Jan 2025
One set of accounts – but two separate returns to HMRC. Bit annoying, we know!
Why Does This Only Happen in the First Year?
Once you’re up and running, your accounting periods tend to fall into a nice, neat 12-month cycle – which means one return per year going forward. Phew!
But in that first year, there’s a mismatch between what Companies House want (your full accounting period) and what HMRC will accept (no more than 12 months on a single return). So this is very much a first-year-only kind of problem.
What’s the Difference Between a Tax Return and Accounts?
Great question! Here’s a simple breakdown:
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Corporation Tax Return (CT600) – This goes to HMRC and tells them how much profit your company made, and how much tax you owe.
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Financial Statements (aka your accounts) – These go to Companies House and are more about showing the overall health of your business – including assets, liabilities, and all that good stuff.
So even though your accounts only need to be prepared once a year, your tax side might need a bit more love in year one.
Top Tips for Getting It Right First Time
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Use accounting software – It’ll help keep everything clean and tidy across your different reporting periods. Trust us, future you will thank you.
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Keep super clear records – Especially important when juggling two corporation tax periods.
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Chat to your accountant – If in doubt, get some expert help. They’ll make sure you don’t overpay and that everything’s submitted properly and on time.
Final Thoughts
Two corporation tax returns in your first year might sound like a faff, but it’s a one-time thing – and totally doable with the right info and support.
At PPF, we’re all about making business finances simple, so if this is stressing you out, book in a discovery call. We’re here to help you navigate the numbers and keep things as stress-free as possible!
Want tax tips and advice? Check out PPF on YouTube
