The UK is well known for its complex tax laws, but what is often less understood are the historical reasons behind the dates and taxes still valid today. For example, inheritance tax and stamp duty land tax were initially introduced in 1694 to pay for war against the French. Now, 328 years later, we still pay these taxes, and stamps are still referenced for the property transaction tax in England and Northern Ireland, 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 child 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 closely follows the day 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) – something genealogists will be keenly aware of.
As the biggest date in the financial calendar, it also prompted the payment of many taxes. And although the date changed, this was due to calendars changing rather than payment schedules.
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 whereby the earth ‘only’ takes 365.2422 days to circumnavigate the sun, instead of the 365.25 set out by the Julian calendar established in 46 BCE. While the Gregorian yearbook 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 and 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
The final change was in 1800. It was the last time the Julian calendar influenced English life due to its quirk of marking the first year of every new century as a leap year. The Gregorian approach is to only have an extra day when the year (including the first of each century) is divisible by four. As a result, the tax year was moved by one more 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 the dates back or forward by a few days 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.
And although no decision would immediately follow the independent treasury office publishing its review later in 2021, we may yet find that the 2021/22 financial year sees a change. Just how many would believe the new 2022/23 tax year start on 1 April is not a hoax will be one for the government and tax advisers to overcome.
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