It seems crazy that the tax year end in the United Kingdom is 5th April. Additionally, month ends for payroll tax compliance are the 5th of the month. Wouldn’t it be sensible to move the tax year and month ends to the last day of the calendar month?
It’s Down to Calendars
To find the ‘geeky’ answer we have to go back to 1582 when Pope Gregory XIII ordered an alternative to the Julian calendar which was introduced by Julius Caesar in 46 BC to replace the previous Roman calendar.
The Julian calendar was fairly accurate but differed from the solar calendar by several minutes a year which was not a lot in one year but builds up to several days over the centuries.
With this in mind, Pope Gregory XIII introduced the ‘Gregorian’ calendar in 1582 to rectify the inaccuracies of its predecessor, the Julian calendar.
Although the new Gregorian calendar was used in much of Europe, Britain still used the old calendar which was 11 days off the rest of Europe by the 1700’s. In 1752 Britain needed to move to the Gregorian calendar to synchronize with the rest of Europe.
Now for the geeky accountant bit
In the old Julian calendar as used in Britain, the tax year ended on 24th March (the old New Year’s Day, i.e. the Spring Equinox). The new Gregorian calendar was 11 days ahead of the old Julian one.
On changeover from the old to the new system in Britain, Wednesday, 2nd September, 1752 was followed by Thursday, 14, 1752. The 3rd to 13th September, 1752 never happened in order to make up the 11 days historical slippage.
The British Treasury was anxious not to lose 11 days of tax revenue. It decided that the tax year that would have ended on 24 March, 1753 (a short year of 354 days after losing the 3rd to 13th September, 1752) would now end on 4th April, 1753. This made up for the 11 days lost.
If that’s not geeky enough (accountants love it!)
There was a further change in 1800. Sadly 1800 was not a leap year in the new Gregorian calendar but would have been under the old Julian system.
To gain the extra one days tax revenue that would otherwise have been lost, the British Treasury once again extended the tax year, this time from 4th April, 1800 to 5th April, 1800 where it has remained until the present day.
Who says ‘Tax Needn’t be Taxing’!
Is it not time to change the British tax year to 31 March? It would save a lot of confusion, particularly, for payroll. Consider, a July monthly payroll is in fact in the month ending 5th August for tax purposes – how confusing!
HMRC have already changed the tax year end for Corporation Tax (covering Limited companies and PLC’s) to 31 March. Surely it is time to do the same for all other taxes covering individuals, sole traders and partnerships.
The Dales Accountancy Service