Happy New Tax Year and a hiccup
How can so much happen in one week, first, there was a four-day working week (for some) followed by the clocks moving forward an hour. Then it was Easter Sunday and then the start of another four-day working week. Monday happened to be the 1st of April, not only a bank holiday but April Fool's Day as well. After some research on “GOOGLE” I concluded that the common misconception that pranks could only be made up till noon and that on a leap year (2024) the joke could last all day were not necessarily true, as the light-hearted fun can continue all day every year.
However, the big event of the week must be the end/ start of the tax year 5th/ 6th April. Have you ever thought that this is a strange date, and wondered how it came about?
Grab yourself a cup of tea and let's find out.
A Historical Hiccup:
The 5th of April might not be a date etched in most people's minds, but in the UK, it holds a unique significance – it's the end of the tax year. But why this seemingly random date? The answer lies in a historical calendar quirk and a touch of tax-collecting pragmatism.
Before 1752, Great Britain followed the Julian calendar, which drifted slightly out of sync with the solar year. This meant the "old" New Year's Day fell on March 25th, and conveniently for the government, the tax year began on the same date.
However, the Julian calendar's inaccuracy caused problems. By 1752, the difference between the Julian and the more accurate Gregorian calendar had grown to 11 days. To rectify this, Britain adopted the Gregorian calendar. Here's where things get interesting for taxes.
The Treasury, keen to avoid a loss of tax revenue, decided the tax year starting on March 25th, 1752, would simply be a shortened year of 365 days, ending on April 4th. This ensured a smooth transition without a gap in tax collection. Consequently, the next tax year began on April 5th, a date that has stuck – though technically, the tax year now starts on April 6th.
While the UK's tax year ending might seem like an oddity, many countries have tax year ends that differ from the calendar year. Here's a glimpse into some global variations:
United States: The US tax year aligns with the calendar year, ending on December 31st. This simplifies tax filing for most individuals but can be complex for businesses with international operations.
Australia: Similar to the US, Australia follows a July 1st to June 30th tax year. This aligns with their fiscal year, making government budgeting and tax collection more streamlined.
Canada: Canada's tax year follows the calendar year, ending on December 31st. However, corporations have the flexibility to choose a fiscal year-end that suits their business cycle.
Japan: Japan's tax year runs from April 1st to March 31st. This aligns with their fiscal year, similar to Australia.
There are several reasons why countries might choose a tax year end that deviates from the calendar year:
Historical reasons: As seen in the UK's case, historical events like calendar changes can influence tax year ends.
Fiscal year alignment: Many countries choose a tax year end that aligns with their fiscal year, the period for which government budgets are planned and executed. This simplifies budgeting and resource allocation.
Climate and economic cycles: Some countries might choose a tax year end that coincides with a lull in economic activity or a specific harvest season, making tax collection and reporting easier.
The UK's slightly unusual April 5th tax year ending is a reminder of how historical events can leave lasting imprints on a nation's financial system. While the date itself might not be strictly accurate, it serves as a testament to the UK's pragmatic approach to tax collection and its enduring legacy. As the world continues to become more interconnected, we might see some convergence as the tax year ends, but for now, the global landscape remains a fascinating mix of historical quirks, economic considerations, and administrative practicality.
YouTube
As regular readers of my newsletter will know, I have been talking about making some new videos for the channel. With the help of Adam Hollier I have finally uploaded a few over the last week there will be plenty more to come over the coming weeks.
It's not all about tax, as can be seen in this video "The entrepreneurial tax story"
If you enjoy the clips, please remember to give them a like and even subscribe to the channel so that you don’t miss any future editions.
I hope you have enjoyed this edition of my newsletter, and found it both enjoyable and informative, if you have any suggestions or comments then please let me know it is always good to hear from you. In addition to the newsletter, I am also updating the website, so please take a look from time to time to see what is happening.
If I or the Tax Matters team can be of any assistance to you, your family or your friends then please do not hesitate to contact me at 01442 828006 or jreeves@taxmatters.tax