Every UK limited company must prepare annual accounts at the end of its financial year and file them at Companies House. The accounts give a snapshot of the company’s financial position and performance. The notes to the accounts explain the numbers in more detail and disclose information that the law requires.
This guide covers what goes into the accounts, what the notes must include and how the filing requirements differ depending on your company’s size.
What annual accounts include
A full set of annual accounts for a UK company contains:
- Balance sheet (statement of financial position)
- Profit and loss account (income statement)
- Notes to the accounts
- Directors’ report (not required for small companies taking the exemption)
- Auditor’s report (only if an audit is required)
The balance sheet must be signed by a director and dated. It is the primary document that gets filed at Companies House for small companies.
The balance sheet
The balance sheet shows what the company owns (assets), what it owes (liabilities) and the residual equity belonging to shareholders, all at a single point in time – your financial year end.
Structure
| Section | What it includes |
|---|---|
| Fixed assets | Tangible assets (equipment, vehicles), intangible assets (goodwill, patents), investments |
| Current assets | Stock, debtors (trade receivables), cash at bank and in hand |
| Creditors: amounts falling due within one year | Trade creditors, tax owed, short-term loans, accruals |
| Net current assets | Current assets minus current creditors |
| Total assets less current liabilities | Fixed assets plus net current assets |
| Creditors: amounts falling due after more than one year | Long-term loans, deferred tax |
| Net assets | Total assets less all liabilities |
| Capital and reserves | Share capital, share premium, retained earnings (profit and loss account reserve) |
The bottom line is straightforward: net assets must equal capital and reserves. If they do not balance, something is wrong.
Comparative figures
The balance sheet must show figures for both the current year and the previous year side by side. This lets anyone reading the accounts see how the company’s position has changed.
The profit and loss account
The profit and loss account (P&L) shows income, expenses and the resulting profit or loss for the accounting period.
| Line | What it covers |
|---|---|
| Turnover | Revenue from your main trading activities |
| Cost of sales | Direct costs of producing goods or delivering services |
| Gross profit | Turnover minus cost of sales |
| Administrative expenses | Overheads – rent, salaries, office costs, professional fees |
| Operating profit | Gross profit minus administrative expenses |
| Interest payable/receivable | Borrowing costs and bank interest earned |
| Profit before tax | Operating profit adjusted for interest |
| Tax | Corporation Tax charge for the period |
| Profit after tax | The bottom line – what remains after tax |
Small companies that file abridged accounts at Companies House do not need to file the P&L publicly. It is still prepared internally and used for the Company Tax Return, but it stays private. From 1 April 2028, small companies and micro-entities must also deliver a profit and loss account to Companies House, and the abridged option ends; see the end of abridged accounts and companies house accounts filing changes from april 2028.
Notes to the accounts
The notes are where the real detail lives. They explain the accounting policies used, break down the summary figures in the balance sheet and P&L, and provide disclosures required by law and accounting standards.
Accounting policies note
Every set of accounts starts with a note describing the basis of preparation and the key accounting policies. This typically covers:
- Which accounting standard is used (FRS 102 Section 1A, FRS 105 or full FRS 102)
- Whether the company is a going concern
- Revenue recognition – when turnover is recognised
- Depreciation rates and methods for fixed assets
- Stock valuation method (cost, net realisable value)
- Foreign currency translation policy (if applicable)
Common required notes
| Note | What it discloses |
|---|---|
| Fixed assets | Cost, accumulated depreciation and net book value for each category, with movements during the year |
| Debtors | Breakdown of trade debtors, prepayments and other debtors |
| Creditors | Breakdown of trade creditors, tax and social security, accruals, other creditors |
| Share capital | Number and class of shares, changes during the year |
| Loans and borrowings | Terms, interest rates, repayment schedule |
| Directors’ remuneration | Total pay and benefits (not required for micro-entities using FRS 105) |
| Related party transactions | Transactions with directors, shareholders, connected companies |
| Commitments and contingencies | Operating leases, guarantees, pending legal claims |
| Post balance sheet events | Significant events between the year end and the date the accounts are signed |
Director’s loan account
If a director owes money to the company at year end (an overdrawn director’s loan account), this must be disclosed. A Section 455 tax charge can arise if the balance is not cleared within nine months and one day after the accounting period. The rate equals the dividend upper rate in force when the loan was made. Relief is available after repayment, but timing rules delay the cash recovery.
Accounting standards and company size
The level of detail in your accounts depends on which accounting standard you use, which in turn depends on your company’s size.
| Category | Turnover | Balance sheet total | Employees | Standard |
|---|---|---|---|---|
| Micro-entity | Up to £1 million | Up to £500,000 | Up to 10 | FRS 105 |
| Small company | Up to £15 million | Up to £7.5 million | Up to 50 | FRS 102 Section 1A |
| Medium company | Up to £54 million | Up to £27 million | Up to 250 | FRS 102 (with reduced disclosures) |
| Large company | Above medium thresholds | Above medium thresholds | Over 250 | Full FRS 102 or IFRS |
These thresholds apply to financial years beginning on or after 6 April 2025. You must meet at least two of the three criteria (turnover, balance sheet, employees) to qualify for a category. The test is applied over two consecutive years – you move up or down only if you cross the threshold for two years running.
Micro-entity accounts (FRS 105)
Micro-entities file the simplest accounts at Companies House:
- Balance sheet only (no P&L, no directors’ report)
- Very limited notes (accounting policies and guarantees only)
- No requirement to disclose director remuneration or related party transactions
The trade-off is that FRS 105 does not allow revaluation of assets, recognition of deferred tax, or capitalisation of development costs.
Small company accounts (FRS 102 Section 1A)
Small companies can file abridged accounts:
- Balance sheet (can combine certain line items)
- Notes to the accounts (reduced disclosures compared to full FRS 102)
- No P&L needs to be filed publicly
- No directors’ report required (though one must still be prepared)
Most UK companies qualify as small, so this is the most common filing format.
Filing at Companies House
Deadlines
- Private companies – 9 months from the accounting reference date
- Public companies – 6 months from the accounting reference date
Late filing attracts automatic penalties starting at £150 for private companies.
Filing format
Companies House accepts accounts filed:
- Online through the Companies House WebFiling service
- Via software filing using compatible accounts production software
- On paper (but this is slower and more error-prone)
For the Corporation Tax return, accounts must be submitted to HMRC in iXBRL (inline eXtensible Business Reporting Language) format. Most accounting software handles this conversion automatically.
Preparing the accounts – practical steps
Step 1: Close the books
Complete all bank reconciliations, enter outstanding invoices, calculate accruals and prepayments. Your trial balance at this point should reflect every transaction in the accounting period. See our guide on the UK year-end process for a detailed walkthrough.
Step 2: Make year-end adjustments
| Adjustment | Purpose |
|---|---|
| Depreciation | Spread the cost of fixed assets over their useful life |
| Accruals | Recognise expenses incurred but not yet invoiced |
| Prepayments | Defer expenses paid in advance to the correct period |
| Bad debt provision | Write down debtors you do not expect to collect |
| Stock adjustment | Adjust stock to the lower of cost or net realisable value |
| Corporation Tax provision | Estimate the tax charge for the year |
Step 3: Produce the accounts
Generate the balance sheet, P&L and notes from your adjusted trial balance. Check that the balance sheet balances, the P&L ties to the movement in retained earnings, and all required notes are complete.
If retained earnings does not tie back to the current year result, review closing profit and loss accounts at year end before treating the difference as suspense or rounding.
Step 4: Director approval
At least one director must sign the balance sheet to confirm the accounts give a true and fair view (or, for micro-entities, are prepared in accordance with FRS 105). The accounts must be approved by the board before filing.
Step 5: File
Submit the accounts to Companies House within the deadline. If your company requires an audit, the auditor’s report must be attached. If an audit is not required, the accounts should include the small company or micro-entity audit exemption statement.
Audit requirements
Most small companies are exempt from audit. You qualify for the exemption if you meet at least two of:
- Turnover of no more than £15 million
- Balance sheet total of no more than £7.5 million
- No more than 50 employees
Even if your company is exempt, shareholders holding at least 10% of shares can require an audit by giving notice to the company.
Common mistakes
Not matching accruals to the right period
If you receive an invoice in April for work done in March, the cost belongs in March’s accounts. Missing accruals understate expenses and overstate profit, which means you may overpay tax in the short term and have to correct it later.
Forgetting post balance sheet events
Events after the year end but before the accounts are signed may need to be disclosed or even adjusted for. A major customer going into administration the week after your year end, for example, may require you to write down the debtor in the year-end accounts.
Filing the wrong format
Filing full accounts when you could file abridged, or failing to include required notes, leads to rejection or unnecessary disclosure of sensitive information. Check which format your company qualifies for before filing.
Overlooking related party transactions
Transactions between the company and its directors, shareholders or connected companies must be disclosed. This includes the director’s loan account, rent paid to a director’s property company, and management charges between group companies. Missing these disclosures can trigger questions from HMRC and Companies House.