Why does the Tax Year end on 5th April?

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Photo Credit: Graeme Darbyshire via Compfight cc

This is a question often asked of us tax advisers in pubs (usually after the person speaking to us has stopped shouting at us about having to pay too much tax).

Prior to the eighteenth century, the calendar year began on 25th March and so it was quite natural for the tax year to start on the same date.  In 1752 we moved to the Gregorian Calendar, because the old (Julian) calendar was 11 days adrift from the rest of Europe.

So 4 September 1752 was followed by 15 September 1752 and there was uproar by people wanting their 11 days back (not surprisingly since they weren’t compensated for the loss of income from a short month). At the same time we moved New Year to 1 January.  In such a climate the Inland Revenue felt that they could not start the next tax year on 25th March as usual (applying a degree of common sense), as the already irate taxpayers would effectively be paying a full year’s tax for only 354 days. The “solution” was to move the start of the following tax year back by the equivalent 11 days to April 5th.

Which almost brings us to the tax year starting on 6th April – the additional day came about because an additional day was added to take account of the skipped Leap Day in 1800.  Since then, the Revenue have left well alone and further Leap Days (missed or otherwise) have not impacted on the tax year.

This is also the reason why the “Quarter Days” that many landlords still use for rental periods are to the 25th of each calendar quarter – this dates back to the Julian calendar.

Whilst some people say that this should be tidied up to match up with Calendar years, The good reason to keep it as it is, is that it’s a real pain for lots of people in countries where the end of year holidays (Christmas and New Year) are taken over by the end of financial year chaos. It’s much better, in my opinion, to have a mad rush to finish the year in March than in December. For whatever reason it happened, I think it works.  And there is always the prospect of chocolate Easter eggs to keep us going through the busy period!

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