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Why does the UK tax year end on 5 April?

Most calendars start on 1 January and end on 31 December, but not the UK personal tax year. Karen Bennett explains the history behind the date as we count down the days to the end of the 2020/21 tax year.
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Published 12 February
3½ mins

The UK is known for its complex tax laws, but what is often less known are the historical reasons behind the dates and taxes still valid today. For example, as we mentioned in our last property tax webinar, stamp duty land tax was initially introduced in 1694 to pay for war against the French. Now, 327 years later, we are still paying the tax and stamps are still referenced, even though they are no longer attached to documents to acknowledge payment.

History is also the reason behind the start of the UK tax year, as originally it was the same day as Lady Day on 25 March. Otherwise known as the Feast of the Annunciation (where it is believed the Angel Gabriel visited ‘Our Lady’ Mary and told her she would have a son nine months later), Lady Day originally kicked off the whole annual calendar,  followed by Midsummer Day on 24 June, Michaelmas Day on 29 September and Christmas Day on 25 December.

While all these quarterly dates provided a start date for activities, e.g. Michaelmas Day remains the start of many traditional universities’ academic years, Lady Day was the most important as it marks a date with the same number of hours of daylight as hours in the night, allowing the agricultural season to begin. In fact, Lady Day was so significant that it marked the start of each new year for England instead of 1 January (which belonged to the previous year).

As the biggest date in the financial calendar, it also prompted the payment of many taxes – a schedule that changed as calendars changed.

The first important change came on 24 February 1582 when Pope Gregory XIII decided to introduce a new calendar and remedy a centuries-old miscalculation. The eponymous Gregorian yearbook noted it ‘only’ takes 365.2422 days for the earth to circumnavigate the sun, instead of the 365.25 under the Julian calendar from 46 BCE. While it was almost immediately adopted by nations under Catholic control, England, as a Protestant country (and others), did not adopt the calendar.

But the old Julian calendar was ‘slower’ than its replacement. And over the centuries, this added up. It meant England lagged behind most of the rest of the world at a time when its rapidly expanding empire needed the country to be in sync with trading partners. The first catch-up came in 1751 when New Year’s Day became 1 January, meaning England’s calendar for that year was just 282 days, from 25 March to 31 December. Then, to allow for the extra 11 days, in 1752, the English calendar jumped from 2 September to 14 September overnight. However, as the change would have meant losing 11 days of tax revenue, it was also decided that the end of the tax year be shifted 11 days too.

However, the Julian calendar wasn’t quite ready to give up its influence on English life. One of its quirks was to mark the first year of every new century as a leap year, instead of the Gregorian approach to only have the extra day when the year (including the first of each century) was divisible by four. In 1800, therefore, the tax year was moved by another day to 6 April in recognition of the skipped leap year.

Confusingly, while the tax year start became detached from Lady Day, the original 25 March date is still relevant for some financial calendars. Many property rents still fall due on quarter dates and, as such, many agricultural and commercial landowners still receive income on this basis – although some now set dates a few days before or after so that people are not checking their bank accounts on Christmas Day.

One piece of history that has fallen by the wayside from these dates was that any arguments and disputes – in theory at least – would have to be resolved before the day dawned. Let’s hope the 3 March Budget doesn’t prompt too many of these – something we can no doubt cover off in our webinar the following day (i.e. 4 March).

Clients of Nedbank Private Wealth can get in touch with their private banker directly to understand how wealth planning can help them achieve their financial goals and objectives, or call +44 (0)1624 645000 to speak to our client services team.

 

If you would like to find out more about how we can help you with wealth planning support, please contact us on the same number as above, or complete the contact us form using the link below.

Any examples of investments and structures used are for illustrative purposes only. The inclusion does not constitute an invitation or inducement to buy any financial investment or service. None of the content constitutes advice or a personal recommendation. Nedbank Private Wealth does not provide individual tax advice, and instead works with clients’ existing advisers or can provide an introduction if needed. Individuals should seek professional advice, based on their jurisdiction and personal circumstances, before making any financial decision.

about the author

Karen Bennett

Karen Bennett

Karen joined the marketing team at Nedbank Private Wealth in 2019, and is based out of the London office. She brings to the table over 20 years of marketing and public relations experience in financial services in Asia, Europe and the UK.

 

Primarily focusing on the development and distribution of content for the bank, Karen is also in charge of our digital marketing and client engagement. She holds a B.A. (Hons) in Business Administration from the UK and a Diplombetriebswirt from Germany.

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