Sunday, 5 April 2020

WHY DOES THE TAX YEAR REALLY BEGIN ON 6 APRIL?


The tax year in the UK starts on 6 April and runs through to the following 5 April. To find out why we need to go back  a    l  o  n  g    way.

Romans
Just over 2000 years ago, in AD 14, the first Roman Emperor Augustus died. Among his many legacies was the calendar we use today.

It was initially devised by his predecessor Julius Caesar. By the time Gaius Julius came to power the Roman calendar was in a mess. One reason was that it was a secret religious document controlled by the priest class and not subject to outside scrutiny. Their job was to make the calendar work and determine the dates of religious holidays, festivals, and the days when business could and could not be conducted. But they had done it badly for many years and Caesar inherited a calendar that was out of step with the seasons by a quarter of a year.

He called in an Egyptian astronomer Sosigenes and decided to put things right. He added 90 days to the year 46 BC to bring the calendar into line with the seasons so that the spring equinox was on 25 March and the year began on 1 January as it was supposed to do. Caesar decreed that in future the calendar would follow the solar year of 365.25 days divided into twelve months of 30 or 31 days apart from the 28 day February to which would be added the leap day every fourth year.

Two years later, on the Ides of March 44 BC (15 March), Julius Caesar was assassinated on the steps of the Senate. As was their wont, the priests who were left in charge of the calendar mistook the instructions and added the extra day every third year (they counted inclusively 1-2-3-4 so to them the third year was called the fourth).

This error went unnoticed for more than thirty years and was finally corrected by Julius's successor, Augustus. By then the seventh month had been named after Julius and on Augustus's death in AD 14 the eighth month was named for him.

Apart from that one change the amended Julian calendar with the same months of the same lengths and a leap year every fourth year has run continuously since the year 8 BC.

Church
But one small correction was needed. The Julian Calendar assumes the year is 365.25 days long - hence the extra leap day every four years. In fact the year is very slightly shorter than that. So over many centuries the calendar began to get more and more out of step with the seasons. Towards the end of the 16th century it was almost two weeks ahead of the Sun. Pope Gregory XIII decided to correct it. He took ten days out of the calendar - which fixed the spring equinox around 20/21 of March - and decreed that in future there would be no Leap Year in century years unless they were also divisible by 400. Taking out three days every 400 years would almost precisely align the new Gregorian calendar with the time it takes the Earth to orbit the Sun.

The change was made in October 1582 and much of Europe soon followed. But the Protestant UK refused to obey a Papal decree and no change was made in the UK or in what were then its Colonies and Dominions. So our calendar got further out of step with the seasons and of course our dates were different from much of Europe.

Britain
It took nearly 200 years before the British Government decided to make the necessary changes. The Calendar (New Style) Act 1750 decreed that Wednesday 2 September 1752 would be followed by Thursday 14 September thus removing eleven days and bringing the calendar back where it should be. Note that the weekdays were not changed - the weeks we use have proceeded unchanged since the eight day Roman week was changed by the adoption of Christianity in 325 AD.  

The Act also set the start of the new year on 1 January. Many people had reverted to starting it on the old Roman equinox day of 25 March. You can still find eighteenth century books published early in the year with two dates such as '1724/25'. They were published in what we would call 1725 but before the new year on 25 March. 

But there was a problem. Tax was due over a whole year. So if there were 11 fewer days in 1752 tax would be due 11 days early and over a shorter period. At the time the tax year began on that Roman spring equinox day, 25 March. It was called Lady Day and was one of four quarter days when rent and other payments fell due. The quarter days are
  • March 25 (Lady Day)
  • June 24 (Midsummer Day)
  • September 29 (Michaelmas Day)
  • December 25 (Christmas Day)

In the 1750s the tax year was not a concept as it is today. We are now taxed on our income which arises during the tax year 6 April to the following 5 April. But there was no income tax in 1750 - that innovation was nearly 50 years away. However, there were regular tax payments to be made - Land Tax and Window Tax for example were paid on the quarter days and there was no concession to the shorter year. The Land Tax year ran from 25 March and that continued until the tax was abolished in 1963. The quarter days too remained as they were. So people paid rent on the same day they always had. So for the quarter June 24 to September 28 1752 they would have paid the same rent for eleven days less in their property. Similarly, servants who were normally paid on a quarter day would have been paid the same amount for eleven days less work. To resolve that problem tables were published suggesting how much the pay or rent should be reduced. Over the whole year the reduction should be 7¼d in the £. But over a quarter it would be 2s 5d in the pound, or just under an eighth. One publication (The True Briton, 20 September 1752, pp 118-119: from O'Brien, below, App.51) suggested using exactly an eighth which is 2s 6d, erring on the side of the employer for wages but on the side of the tenant for rent. There is evidence in a brilliant book by Robert Poole (Time's Alteration, 1998) that there was widespread confusion. Some payments were abated while others were allowed to run to the 'old' quarter days 11 days after the calendar dates. The opportunity for error and cheating people was extensive. The complications lasted for at least 50 years. 

Extra day
If the eleven days were added to the start of the Land Tax year on 25 March you get to 5 April for the start of the tax year. That is still one day short of its present starting date. And in in 1758 Window Tax was collected for the first time 'from and after' 5 April. That is the first mention of 5 April in the context of the tax year. Subsequent Acts also used that phrase from which historians have concluded that the tax year began on 5 April and ran to the following 4th April. 

Many theories have been advanced for where the extra day came from. The simplest and neatest explanation suggests that from 1753 the tax year should have begun on 5 April but the extra day was added in 1800. That year would have been a Leap Year under the old calendar but not under the new Gregorian Calendar as century years (except those divisible by 400) were no longer leap years. It is said there were protests. If people were denied their extra day of 29 February then they would be paying the same taxes but over a shorter period than they expected. So the Government extended the tax year by a day so it ended on 5 April and the next one began on 6 April 1800. There is little evidence for this. But you will find a version of it repeated many times if you google the question 'why does the tax year begin on 6 April'. Indeed, I had it myself in an earlier blog on this topic.

In any event that explanation failed to deal with 1900 except to say that no-one demanded the extra day for the tax year and the question did not arise in 2000 as it was divisible by 400 and so was a leap year. Incidentally, Microsoft Excel still counts the year 1900 as a Leap Year 250 years after the reform that stopped it being one. It blames Lotus whose spreadsheet software it bought in 1995. 

From
However there is a better and more complete explanation. Evidence has been gathered by Alan O'Brien in his massive self-published book Why the Tax Year Begins on Sixth April (2018) (here the etext is free and you can also buy the 672 pp paperback cheaper than on Amazon). It suggests that the whole question is misplaced. He looks in great detail at the legal use of the word 'from'. He provides evidence that the phrases 'from 25 March' and 'from and after 25 March' both mean that the year did in fact begin on the next day 26 March and end on 25th March following. And the phrase 'the year ending on the twenty fifth day of March' is found in a 1799 Land Tax Act. If you add eleven days to 26 March you get to 6 April and he says that is why the present tax year begins on that date. 

I found his book very persuasive. Not least because there are clear statements in tax laws from 1758 that the tax year ends on 5 April and absolutely none that it ends on 4 April - a date not mentioned once. The first Act to introduce an income tax in 1799 clearly did collect tax on income in the year which ended on 5 April 1800. It was the phrase which said that the year ran from 5 April 1799 until 5 April 1800 which may have caused the confusion suggesting an extra day was added for the Leap Year. But other words in the Act show that is not the case. The legal meaning of the word 'from' shows the first income tax was charged over a year beginning on 6 April 1799 and ending on 5 April 1800. As it now.

Paul Lewis
version 2.25
14 April 2020