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Why does the tax year end 5 April and not 31 March

Should the tax year end officially change from 5 April to 31 March?

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WE all know that the tax year runs from 6 April to 5 April. And we also know there are more important issues facing our country at the moment than thinking about changing the dates of our tax year. But, when would be the right time? Or should we leave things as they have been for hundreds of years?

On 1st April I shared an April Fools announcement suggesting that 2019 would be the last time the tax year would end on 5 April. My 'announcement' included some April Fools related acronyms and pointed readers to a page on my website that revealed it was an April Fool. I also added a full explanation there as to the reasons why our tax year runs from 6 April to 5 April. 

The responses I received to my 'announcement' surprised me. Lots of people admitted to having been caught out initially and along with many other respondents all suggested I should campaign for the change! 

I'm curious as to what AccountingWeb readers think. Please let me know.  Would you, in principle, welcome a change in the tax year so that it runs from 1 April to 31 March each year? 

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By SXGuy
02nd Apr 2019 15:53

Why not 1st Jan or Feb, or may? Surely there's no real answer?

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02nd Apr 2019 16:04

Well for all our SA clients, we treat is as 31st March for simplicity, per HMRC's guidelines, when drawing up P&L accounts for sole traders and landlords.

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By DJKL
02nd Apr 2019 16:07

You are of course proposing moving to 31 st March as it is only a few days and most of the UK's fiscal cycle (local authorities) run to March, however lets face it without the calendar change in 1752 and tax year in 1753 and then 1800 it would be 25th March, as it always was, a far more sensible day than 5th April.

However logic to me suggests the year should be to 31 December as in a fair few other countries. (e.g.I just received my Swedish tax return about two/three weeks ago)

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to DJKL
02nd Apr 2019 16:39

Agreed, 31st December makes complete sense.

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to Slim Freddie
02nd Apr 2019 17:33

Slim Freddie wrote:

Agreed, 31st December makes complete sense.

It only makes sense if the Government's financial year is also changed to 31st December.

Personally, I like the eccentricity of 5th April. And I'm not sure whether software companies would enjoy making the necessary tweaks to, in particular, payroll software.

Loads of consequential amendments to legislation - and for what ? To make it all look neat ? Has Parliament nothing better to do at the moment ?

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to DJKL
03rd Apr 2019 12:07

31/12 would make our tax planning easier with clients based in France. Is there a petition I can sign?

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to accountantccole
05th Apr 2019 10:43

accountantccole wrote:

31/12 would make our tax planning easier with clients based in France. Is there a petition I can sign?

The French should change their year end to 5th April.

Why are you letting them bully you ?

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02nd Apr 2019 16:13

I'm not very good on history but doesn't the Chinese calendar pre-date all these - perhaps we should adopt that, particularly now that China is likely to become the biggest economy in the world soon....

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By DJKL
to Dougscott
02nd Apr 2019 16:29

In true Chines fashion, the UK in 2019 will not be "The year of the Pig "but instead "The year of the Vote (meaningful or indicative)"

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02nd Apr 2019 16:47

That would be the sensible thing to do. I look forward to the day we have a sensible Parliament.

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to AlgernonB
03rd Apr 2019 12:12

AlgernonB wrote:

That would be the sensible thing to do. I look forward to the day we have a sensible Parliament.

You'll be dead by then.

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By DJKL
to lionofludesch
03rd Apr 2019 12:24

A really great insult if addressed to an MP.

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to lionofludesch
03rd Apr 2019 17:01

Everybody will be dead by then!

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to AlgernonB
05th Apr 2019 10:32

Don't hold your breath.......................................

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02nd Apr 2019 17:27

Google's free all this week.

UK Tax History Lesson – How come the UK tax year ends on April 5th?

A long long time ago, 1582 to be exact, Pope Gregory Xiii grew tired of the inaccuracies in the existing ‘Julian’ calendar and ordered the calendar to be changed. The Julian calendar named after the late debatably great Julius Caesar had been in place since 45 BC.

Caesar’s calendar, although reasonably accurate, differed from the solar calendar by 11½ minutes.

This was not a big problem at the start, however, after 500 years this small inaccuracy had started to build up. It built up in fact to be 10 days off the solar calendar. So with this in mind, Pope Gregory introduced the Gregorian calendar.

The Gregorian calendar reduced the length of the calendar year from 365.25 days to 365.2425, a reduction of 10 minutes 48 seconds per year.

This and a few other tweaks ensured Pope Gregory’s calendar was a much more accurate time keeper. The Gregorian Calendar was then introduced in Italy, Spain, Portugal and what was then the Polish-Lithuanian commonwealth.

The Gregorian Calendar was initially quite a slow burner in the British Empire, it wasn't introduced until 1752! By then the British calendar was 11 days off the rest of Europe, with this due to increase as time passed, the British knew it was time for a change.

On the old British Calendar the tax year began on March 25 (the old New Year’s Day). In order to ensure against losing revenue it was decided by the British Treasury that the tax year, which started on March 25 1752, would be of the usual length (365 days) and therefore it would end on April 4, the following tax year beginning on April 5.

Time passed smoothly and most importantly accurately until 1800.

Unfortunately 1800 was not a leap year in the new Gregorian calendar but would have been in the old Julian system. Thus the treasury moved the start of the UK tax year from the April 5 to the April 6 and it has remained there ever since.

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to Accountant A
02nd Apr 2019 17:36

Yup. As I said. I summarised the explanation and put it in my website on Monday.

Thanks (2)
to Accountant A
02nd Apr 2019 17:40

Accountant A wrote:

Google's free all this week.

UK Tax History Lesson – How come the UK tax year ends on April 5th?

A long long time ago, 1582 to be exact, Pope Gregory Xiii grew tired of the inaccuracies in the existing ‘Julian’ calendar and ordered the calendar to be changed. The Julian calendar named after the late debatably great Julius Caesar had been in place since 45 BC.

Caesar’s calendar, although reasonably accurate, differed from the solar calendar by 11½ minutes.

This was not a big problem at the start, however, after 500 years this small inaccuracy had started to build up. It built up in fact to be 10 days off the solar calendar. So with this in mind, Pope Gregory introduced the Gregorian calendar.

The Gregorian calendar reduced the length of the calendar year from 365.25 days to 365.2425, a reduction of 10 minutes 48 seconds per year.

This and a few other tweaks ensured Pope Gregory’s calendar was a much more accurate time keeper. The Gregorian Calendar was then introduced in Italy, Spain, Portugal and what was then the Polish-Lithuanian commonwealth.

The Gregorian Calendar was initially quite a slow burner in the British Empire, it wasn't introduced until 1752! By then the British calendar was 11 days off the rest of Europe, with this due to increase as time passed, the British knew it was time for a change.

On the old British Calendar the tax year began on March 25 (the old New Year’s Day). In order to ensure against losing revenue it was decided by the British Treasury that the tax year, which started on March 25 1752, would be of the usual length (365 days) and therefore it would end on April 4, the following tax year beginning on April 5.

Time passed smoothly and most importantly accurately until 1800.

Unfortunately 1800 was not a leap year in the new Gregorian calendar but would have been in the old Julian system. Thus the treasury moved the start of the UK tax year from the April 5 to the April 6 and it has remained there ever since.

All that's nice and I'm sure a lot of us knew that already but it doesn't really explain why New Year's Day used to be in the middle of March. Which nutter came up with that ?

Nor why the English took over 150 years to move New Year's Day to 1st January after the Scots adopted it in 1600.

You'd have thought we'd have had closer ties with Scotland in a period which includes James VI's takeover of the English throne as well as the Act of Union.

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By DJKL
to lionofludesch
02nd Apr 2019 17:55

New Year may have been March because the first new buds started showing about then, when the cycle of life re both livestock and plants starts circa March that is likely a good time to consider the New Year in an Agrarian society.

It could also be that it was frankly , even with whisky, too cold to celebrate New Year in December with nothing more than a daub of woad to protect from the elements, so March was a bit easier on our exposed bits for a party.

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to DJKL
02nd Apr 2019 18:19

Sure - I can see that. The vernal equinox would have been a smarter choice but, hey, maybe they got their calculations slightly out.

But it doesn't explain why a New Year didn't start at the beginning of a new month.

March 1751 (or 1599 for you) took a year to complete. You have seven days at the beginning of the year and 24 at the end. Surely folk could see that was an unnecessary complication.

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By DJKL
to lionofludesch
02nd Apr 2019 18:33

Only for part of me. Back in 1599 some of my lot were likely up here being shepherds, some were likely in Wiltshire,labouring, and the other lot were just grateful that someone had recently brought back potatoes to be planted in the really wet climate they had to work with and were also grateful Cromwell had not yet been born (April 1599).

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to lionofludesch
03rd Apr 2019 17:04

Only 150 years - positively light speed compared to the ongoing shenanigans in parliament!

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to lionofludesch
05th Apr 2019 12:28

The 25th March has the same relation to the Spring Equinox as Christmas Day does to the Winter Solstice, if that helps explain why it was the start of the new year.

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to Accountant A
03rd Apr 2019 12:06

I'd got it in my head it was to do with a monk and Gregorian calendar changes.
31/3 would make at least a bit more sense!

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03rd Apr 2019 09:49

Haven't we got enough to worry about???

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05th Apr 2019 18:20

Ireland too had its tax year end at 5th April until 2001. At that point, we changed to 31 December which meant that we had a short tax year at the changeover. (I have reason to believe that the transitional arrangements for income tax payers left scope for reduced tax bills if the timing of income could be controlled, but that was never highlighted.) From 2002 onwards, the tax year has been 1 January to 31 December and that works well.

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05th Apr 2019 12:21

To return to Mark's original question, I would most certainly welcome a change to 31st March. Not only does this affect income tax returns, but PAYE is also impacted by this daft anachronism; eg if someone is paid on 4th September, this is in the same PAYE month as those paid at the end of August and not those paid at end of September.

In answer to those who comment that 31 December would be preferable, I agree but that would be much more complicated to change, due to the scope for tax avoidance (or at least tax planning to delay tax due dates). The advantage of the change to 31st March is that there is limited (if any) scope for advantageous tax planning and economic impact to the Treasury. It should be relatively simple to legislate for and the simplification it brings would reap huge administrative benefits. I am surprised that the Office of Tax Simplification have not taken this idea further.

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05th Apr 2019 12:55

I would welcome a change to 31 March year end Mark, yes please campaign for it!

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to Sharon1425
05th Apr 2019 12:57

Or 31 December

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05th Apr 2019 13:20

If we're going for change why not 29th Feb. Then we only have to do returns every 4 years

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05th Apr 2019 13:31

I discussed this with John Whiting when he was chair of OTS because I felt it was something that is desperately overdue. We are the only major economy with a mid-month tax year end date. The next largest economy is Iran. I feel there are all sorts of reasons not least Making Tax Digital. Most software (QuickBooks online, Sage etc) cannot cope with 5 April even though this is a legal requirement (eg property income). I prepared one client's accounts on QBO who has 5 April. I was told I'd need to change his financial year to 31 March but he bought a vehicle on 3 April and wanted the tax relief in that tax year.

I feel it would be a very easy task to switch from 5 April to 31 March (this was done for CT in 1965) but I have a more fundamental question: should we use 31 March? Even that causes confusion. For example HMRC refer to 2019-20 as 2019 for CT but 2020 for income tax. Should we have 31 December?

Moving from 5 April is a no-brainer. But what should we move to?

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to kevinringer
05th Apr 2019 13:51

kevinringer wrote:

Moving from 5 April is a no-brainer. But what should we move to?

Of course - that's what we need. More change in the middle of the MTD and Brexit embarrassments.

How about leaving it a few years ?

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to lionofludesch
05th Apr 2019 14:53

I discussed this with John Whiting about 6 years ago: well before MTD and Brexit. If it is going to be done, it needs to happen before MTD for Income Tax because Sage, QBO etc can't cope with 5 April.

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to kevinringer
05th Apr 2019 15:10

kevinringer wrote:

I discussed this with John Whiting about 6 years ago: well before MTD and Brexit. If it is going to be done, it needs to happen before MTD for Income Tax because Sage, QBO etc can't cope with 5 April.

Why not ?

If we change it to 31 March, how's that going to be any different for folk with a December year end ?

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to lionofludesch
06th Apr 2019 06:50

lionofludesch wrote:

Why not ?


You'd have to ask the software suppliers. Personally I feel software should be able to cope with any period end but it won't. Have you ever tried doing a 5th April year end in Sage or QBO? It's not just mid-month year ends that software can't cope with, Sage, QBO etc can't cope with periods that aren't 12 months.
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By Tornado
to kevinringer
06th Apr 2019 09:18

In fact, more modern software than the mainstream offerings are much more flexible and can cope with any year end date and indeed, any trading period -

https://www.accountz.com/pages/business-accountz

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to lionofludesch
05th Apr 2019 14:55

We changed from PYB to CYB in 1996. In comparison the change from 5 April to 31 March is easy. What I'm less sure of is whether we should change to 31 December.

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to kevinringer
07th Apr 2019 22:24

One of the software packages I used could cope with 365 periods! Imagine doing a period end every morning - just the accruals alone...

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By Tornado
05th Apr 2019 13:38

There clearly needs to be a referendum on this -

* Remain (at 5th April)

* Leave (the 5th April) with options -
a) 31st March
b) 31st December
c) Other date

That should do the trick.

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to Tornado
05th Apr 2019 18:23

Tornado wrote:

There clearly needs to be a referendum on this -

* Remain (at 5th April)

* Leave (the 5th April) with options -
a) 31st March
b) 31st December
c) Other date

That should do the trick.

Anyone for "Leave without a date"?

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05th Apr 2019 15:14

It's one of the first things I would change. Clients are confused enough without this silly 5th April thing. Wonder how many hours are spent dealing with it, explaining it, managing it etc. Responding to emails about it! Doesn't sit well with a modern tax system. Same with paying pensions 4 weekly. I don't think I have a single client who realises this?!!

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By johnt27
05th Apr 2019 16:08

What would make things simpler (irrespective of choosing an alternate date) would be to remove overlap profits and allow soletraders/partnerships to apply the same rules corporate entities do.

If we move to full MTD, with the implications of potentially paying taxes more regularly, this should allow more flexibility than is currently the case under the current payment on account regime.

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to johnt27
05th Apr 2019 16:16

johnt27 wrote:

What would make things simpler (irrespective of choosing an alternate date) would be to remove overlap profits and allow soletraders/partnerships to apply the same rules corporate entities do.

Great - if your only income is from self employment.

Watch out for a raft of complex provisions if you have income from other sources.

Not to mention the transitional provisions.

Not as easy as you think.

What gets up my nose is the notion that we should dumb down the tax system because computers are too thick to cope with it.

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05th Apr 2019 16:23

Re the payroll comment: I have a restaurant client who pay their wages on the 4th weekday on the new calendar month. So yes, some months there are no payruns, some there are 2. Theoretically. In practice, I always date the payroll 5th.

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06th Apr 2019 10:42

Did you know that 05/04/19 is not the end of the NI year? I've just tried to file my 2019 Tax Return but it says £nil Class 2 NICs. I checked my clients and none of them had Class 2 NICs either. I phoned HMRC and they said they had been inundated with calls today about C2NICs and they're all the same reason: the NI year doesn't finish until Sunday so the C2NICs won't appear until Sunday. So we have a CT year end of 31 March, income/CGT/CIS/PAYE of 5 April and NI of Sunday on or after 5 April. Does anywhere else in the world have such a bizarre tax structure?

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to kevinringer
06th Apr 2019 22:11

kevinringer wrote:

Did you know that 05/04/19 is not the end of the NI year?

Yes, of course.

They only work in weeks, Monday to Sunday.

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06th Apr 2019 10:42

There is a silver lining. The UK tax system is so stupidly complex that it gives us all a living. Thanks HMRC, may you long continue to make a mess of it.

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By Dimozz
06th Apr 2019 11:53

31st of March would be good. It would also end a quarter and would help avoid the problem of Christmas for deadlines.

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29th May 2019 17:15

I'm surpried no-one mentioned the book in the link below "Why the Tax Year Begins On Sixth April By Alan O'Brien":

https://books.google.co.uk/books?id=S9J1DwAAQBAJ&pg=PT3&lpg=PT3&dq=Why+t...'brien&source=bl&ots=ABekSHcu6w&sig=ACfU3U2MFUocJKo_IXVlOzw_vKXblt19JA&hl=en&sa=X&ved=2ahUKEwil0djxkMHiAhWitXEKHeb2AnsQ6AEwCHoECAgQAQ#v=onepage&q=Why%20the%20Tax%20Year%20Begins%20On%20Sixth%20April%20alan%20o'brien&f=false

It says the tax year is from 5th April to the following 5th April, rather than from 6th April.

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