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, 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. 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 kicked off the 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 used to mark 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 of these changes 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 an 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 many 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.
In September 2021, the UK’s Office for Tax Simplification put forward a report setting out the pros and cons of changing the date to either 31 March or 31 December. And although the independent advice unit has not made a recommendation for change – that is for the government to decide – it has stated that any changes would be best delayed until at least 6 April 2023 and the start date of Making Tax Digital for Income Tax project.
But whether the date changes or not, we have already lost one piece of history in that these dates were also a deadline for any arguments and disputes to have been resolved – in theory at least. Perhaps something to strive for though…
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