Why does the new tax year start in April? Ask the pope…

Why does the new tax year start in April? Ask the pope…

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Every year there’s a flurry of activity in the financial press and accountants get unusually animated around 5th April, the end of the tax year. It’s our last chance to use ISA allowances, to make any pension contributions or to attempt to offset capital gains.

Ever wondered why the tax year starts and ends on such a seemingly random date? As ever there’s a reason behind the random and it’s a much more colourful story than you might expect. A far cry from the grey suits which dominate financial news these days, our tale involves pioneering popes and trendsetting angels. So, are you sitting comfortably?

Medieval New Years

Over 500 years ago, the tax year started on New Year’s Day. The thing is, New Year’s Day, then called Lady Day,  fell on 25thMarch instead of 1stJanuary. We were a religious lot back then, so the first day of the year corresponded with the day the Angel Gabriel told Mary to paint the manger blue: you’re having a boy. That meant the start of the New Year fell 40 weeks before Christmas Day.

All accounts, including debts and rents, had to be settled by so-called financially-important“quarter days”, which also included Midsummer on 24thJune, Michaelmas on 29thSeptember, and Christmas Day on 25thDecember. A fun way to spend the hours between presents and Xmas lunch.

Time for change in the Papal States

Up until 1582, all these dates had been marked according to Julius Caesar’s ‘Julian calendar’, which had been around since 45 BC. And although it did a reasonable job of splitting up the year into months, each year was about 10 minutes too long… just like every children’s party. After the course of a millennium and a half, this added up to the Julian calendar being 10 days ahead of the sun. It was unsustainable.

And so, in the decade that Queen Elizabeth I smashed the Spanish Armada and an entire colony of settlers vanished in Roanoke, Pope Gregory XIII made the dramatic move to alter the fabric of time. Or rather, he altered the instrument we use to measure the fabric of time. It was out with the shatterproof ruler of Julius Caesar’s ‘Julian calendar’, and in with the solar-powered spirit level of the ‘Gregorian calendar’, which would keep time more neatly aligned to the seasons.

Who are these Europeans telling us what to do?

In something which sounds all too familiar to modern ears, the Brits were having none of this strange European Catholic nonsense and held out until 1752. By this stage we were 11 days out of kilter with the rest of Europe. Deciding that it was about time we caught up with the rest of the world, our defiant forebears faced a financial dilemma: If we move to the Gregorian calendar and in doing so lose 11 days of the year, what happens to the 11 days of taxes we’re owed?

The solution these boardroom boys of the past came to was to quite literally drop 11 days from the calendar;  so 2nd September that year was followed by 14th September, and then push the tax year end out from 25th March to 4th April. As always, tinkering with tax is an unpopular move and riots ensued, led in part by those who felt outraged that their lives had been shortened!

One final change came in 1800 when the goalposts moved by yet another day. The change from the Julian to Georgian??  (gregorian??) calendar meant 1800 was no longer a leap year, but the money-grabbers in power didn’t want to miss out on the extra day’s taxes. The newly updated start date – 6th April – has been with us ever since.

And so, to summarise, the tax year starts on the 6th April as a result of religion, our dislike of Europe and the greedy behaviour of tax collectors. Isn’t it good to see how much mankind and civilisation has moved on since the medieval times.

 

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