December is one of the busiest times for small and medium-sized business owners. Between managing festive sales, employee holidays, and planning for the year ahead, it’s easy to let your financial housekeeping slip. However, December year-end is a crucial opportunity to get your accounts in order, optimise your tax position, and start the new year on a strong footing.
Whether you’re a limited company, sole trader or partnership, following a structured year-end checklist can help you stay compliant, minimise your tax bill and make smarter business decisions. Here’s what to focus on before 31 December.
1. Bring Your Bookkeeping Up to Date
Your first step is ensuring all your financial records are complete and accurate. That means reconciling your bank accounts, credit cards and petty cash, and making sure all sales and purchase invoices have been entered.
Check for:
- Missing expense receipts and supplier invoices
- Outstanding customer payments
- Any personal expenses accidentally paid through the business
- Up-to-date mileage or travel logs
Good bookkeeping not only helps you prepare for year-end accounts but also makes it easier to identify potential tax deductions. Cloud accounting tools such as Xero or QuickBooks can make this process much simpler and your accountant will thank you for tidy records come January!
2. Review Debtors and Creditors
Run your aged debtors and creditors reports to see who owes you money and who you still need to pay. Chasing overdue invoices before year-end can boost your cash flow and present a healthier balance sheet.
Equally, review your supplier balances to make sure you’ve accounted for all liabilities and consider settling small debts before 31 December if it makes sense for your tax position.
3. Take Stock
If your business holds inventory, you’ll need to conduct a stocktake at year-end. This ensures your accounts reflect the true value of goods held on 31 December.
Remember:
- Write off obsolete, damaged or slow-moving stock.
- Ensure your stock valuation method (FIFO, average cost, etc.) is consistent year to year.
- Adjust your records for any stock discrepancies found during your count.
Accurate stock valuation is essential for both your profit calculation and corporation tax return.
4. Review Fixed Assets and Capital Allowances
Now is a great time to review your asset register, from equipment and computers to vehicles and furniture.
Ask yourself:
- Have you disposed of any assets this year?
- Are there any purchases you could make before 31 December to claim capital allowances?
For example, the Annual Investment Allowance (AIA) allows businesses to deduct 100% of qualifying capital expenditure (up to a set limit) from taxable profits. Making planned purchases before year-end could reduce your upcoming corporation tax bill.
5. Check for Accruals and Prepayments
Make sure your accounts reflect all income and expenses for the correct financial year. For example, if you’ve received an invoice in January for services used in December, that cost should be accrued in this year’s accounts. Similarly, if you’ve paid in advance for a service covering next year, record a prepayment.
This ensures your profit figure is accurate and your accounts comply with accounting standards.
6. Plan for Corporation Tax
With corporation tax rates now depending on company profits, effective tax planning is more important than ever. Speak to your accountant about:
- Claiming all allowable business expenses
- Maximising pension contributions before year-end
- Using any available R&D tax relief or creative industry incentives
- Timing dividends or director bonuses to manage personal and corporate tax efficiently
A quick year-end review can often reveal tax-saving opportunities you might otherwise miss.
7. Review Payroll and Staff Benefits
If you employ staff, make sure your payroll records are accurate and up to date. Check that all benefits in kind (such as company cars, health insurance, or staff gifts) are recorded for P11D reporting. It’s also a good time to review employee contracts, bonuses, and holiday pay to ensure compliance before the new tax year.
8. Budget and Plan for the New Year
Finally, use your year-end figures to look forward. Analyse your income and expenses to see what worked and where improvements can be made. Setting budgets and cash flow forecasts early in the year helps you manage growth and avoid nasty surprises.
Many SME owners use this period to book a year-end planning session with their accountant or business advisor. A short meeting can uncover ways to reduce costs, improve efficiency, and strengthen your financial position for 2026.
Get Ready for a Strong Start to 2026
Completing your December year-end checklist might feel like extra admin during a busy month, but it’s one of the most valuable business exercises you can do. Accurate records, timely submissions, and proactive tax planning will save you stress, and money, in the months ahead.
If you’d like tailored advice on year-end accounting, tax efficiency or payroll compliance, our team can help. Get in touch today and start 2026 with confidence.
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