A straw poll of my colleagues revealed (to their embarrassment) that none of them knew why the tax year ends on 5thApril and the new tax year starts the following day, 6th April. All they know is that we are generally pretty busy advising clients on actions required to implement tax savings before the 5th April deadline. Although they are all too young to remember, prior to the introduction of Self-assessment in 1997, 5th April was also the deadline for submitting personal tax returns and claims.
Then there are the keen souls who are so organised (we like them for it) that they get their income and tax information for the past year to us on the 6th April. This year, one exceptionally on-the-ball individual, actually got us his accounts on the evening of the 5th. It’s a fair bet we’ll have finished assessing them and organising his balance sheet, P&L and tax return before some have even thought about sending us their own income and expenditure figures…
However, that’s not what you’re here to find out. The question of the day is, as per our headline, “Why DOES the tax year start on 6th April?” And it’s fair to say it’s a long and complex story that goes a long way back in the mists of time and involves, amongst others, Julius Caesar, the Virgin Mary, the Pope and the UK Treasury.
In fact, it goes as far back as medieval times, when in England and Ireland, the New Year began 25th March. This was also known as Lady Day, because this was reputedly the day the Archangel Gabriel told the Virgin Mary she would become the mother of Jesus Christ. As well as Lady Day, there were also three other “Quarter Days” – Midsummer on 24th June, Michaelmas on 29th September and Christmas Day on 25th December. These Quarter Days were important because people had to settle all their debts and rents before or on them. Lady Day was regarded as the first of the Quarter Days and thus began to become considered to be the start of the financial year. However, precisely why that happened is indeed lost in the mists of time…
Now that’s all well and good, but I hear you cry, why doesn’t our modern financial year end on March 24th and the next one start on the following day? The answer is that since Roman times, Europe had used the Julian calendar, established by Julius Caesar. This calendar had 11 months of 30 or 31 days but February had 28 days, with an extra day every four (Leap) years, as at present. While everyone was happy enough with it, there was a problem in that it did not align with the time it takes the Earth to move around the Sun, so over time the Julian Calendar and the “solar calendar” became adrift by 10 days. The Roman Catholic authorities were concerned because Easter was getting later in the year as a result of this discrepancy.
In October 1582, Pope Gregory introduced a new calendar to solve the problem, with three leap days being omitted every 400 years. Catholic Europe was happy with this new Gregorian calendar, but Protestant Britain (and Russia) were not and continued to use the Julian calendar.
Eventually, the fact that Britain was about 11 days out of sync with the rest of Europe (doesn’t that sound familiar!) was too much and in 1752 the UK decided to drop 11 days from September in order to ‘catch up.’ This meant that the day after 2nd September that year became 14th September. The Treasury realised that these ‘missing’ days could mean a loss of tax revenue, so they extended the 1752 tax year by adding the 11 days on to the end and thus the beginning of the 1753 tax year was moved to 5th April.
This meant we were closer to the current position, but the 5th is obviously not the same as the 6th, so, how did it shift again? What happened was that the Treasury made this further change in 1800, in order to properly account for the differences between the Julian and Gregorian calendars. But 1800 would have been a leap year under the Julian system, although not under the Gregorian calendar. The Treasury, as you might expect, took the opportunity to get some extra money in by continuing to treat 1800 as a leap year, thus gaining an extra day’s revenue. And ever since then, the 6th of April has been the beginning of the tax year…
Finally to be fair to everyone else at M&S, until I started researching this article, I didn’t know the reason why we had a 5th April tax year deadline either!!
Stewart McKinnon, Director, M&S Accountancy and Taxation Ltd.