HISTORY LESSON – WHY THE TAX YEAR STARTS ON THE 6TH APRIL
Something different this week, I was asked why the tax year starts on the 6th of April and doesn’t run alongside the calendar year or at least to a sensible date like the end of a particular month, so I looked it up:
In medieval times New Year started on 25 March although the precise reason why is unknown, but it would have been around the spring equinox so there may be an ancient reason, who knows! Until 1582 Europe used the Julian calendar but this did not align exactly with the solar calendar as it was 11 ½ minutes too long! Might not sound much but by the late 1500’s the Julian calendar was 10 days adrift from the solar calendar which was upsetting the Church. In October 1582 Pope Gregory XIII changed to the Gregorian calendar .. Europe changed but England didn’t (!) and stuck with the Julian calendar.
By 1752 England was 11 days out of alignment with the rest of Europe so decided it really ought to make the change and September went 1st Sep, 2nd Sep, 14th Sep, 15th Sep etc. Yep, they chopped 11 days out of the month. Obviously, the treasury didn’t like the idea of 11 days less tax so they added 11 days on to the end of the tax year and in 1753 the tax year was moved to start on 5 April … we’re still one day adrift … In 1800 the tax year was moved forward one more day because under the Julian calendar it would have been a leap year but it wasn’t under the Gregorian one! It has stayed the same since but was only formalised in 1900.
But, did you know the government’s own financial year runs 1st April to 31st March!
Businesses can of course set their own accounting periods:
For limited companies the default is the end of the month in which you incorporate, so if you set up a business on 10th May the year end would be 31st May but it isn’t set in stone and you can change it.
For those who are self employed / run a partnership you can set your own accounting period too but because reporting ties into the tax year most tend to run to 31st March as it’s easier.