LABOUR'S 74% TAX ON EARNINGS FOR PEOPLE ON UNIVERSAL CREDIT

Some householders who get the means-tested benefit Universal Credit keep just 26p of every extra pound they earn – an effective tax rate of 74%. That hardly fits in with Labour's promise in the King's Speech to 'make work pay'. In some parts of England it the loss could be more - losing up to 77p in every extra pound earned, leaving them with 23p for every extra pound they earn. Those losses undermine the work incentives which Universal Credit is was designed to create. 

For graduates on incomes high enough to make repayments on their student loan but low enough to get Universal Credit, the deductions would be more - they earn an extra £1 and keep just 14p.

Automatic pension deductions reduce these figures even further.

Universal credit

Universal Credit has been rolled out since October 2013 to replace six means-tested benefits and tax credits. It is currently claimed by around five million people. It is the benefit given to all new claims for help with income or rent. It is paid to people on low incomes who cannot work, are looking for work, or work on low or modest pay. People with children get more for two of them and many do not get all their rent paid. 

It is supposed to let people keep more of what they earn and thus boost incentives both to return to work and to earn more once in work. But since November 2021 for every £1 extra earned the credit is reduced by 55p allowing the claimant to keep just 45p. The previous Government - which reduced the withdrawal rate from 63p - said allowing people to keep 45p of what they earn was an incentive to work. However, that figure of 55p withdrawal rate is only accurate for people who earn less than £242 a week and are not householders.

There is one complexity to be aware of. People with a child or children and people who are judged to have 'limited capability for work' get what is called a 'work allowance'. This is not extra money but is simply an amount they are allowed to earn before the taper kicks in. It is set at £411 a month (£94.85 a week) if universal credit includes help with housing costs and £684 a month (£157.85 a week) if it does not. So those people can earn up to those amounts and the taper will not apply to those earnings. It does apply though to every pound earned when their income is above those amounts. And for everyone else the 55% taper applies to the first pound earned. 

Taxpayers

Universal Credit is worked out after tax and National Insurance have been deducted. In 2024/25 anyone earning more than £242 a week pays National Insurance and income tax. National Insurance was recently reduced and now takes 8p in the pound and income tax which begins at the same level takes another 20p in the pound before their Universal Credit is worked out. That leaves 72p of each pound. The Universal Credit taper then reduces their benefit by 55% of that net amount. The total loss from NI, income tax, and reduction in Universal Credit is 68p from each £1 they earn. So they keep less than 32p. But that is only part of the picture.

Householders

Universal Credit, despite its name, does not replace all means-tested benefits. It does not replace the means-tested reduction in council tax which is now called Council Tax Reduction and is operated by local councils. Like all means-tested benefits Council Tax Reduction is withdrawn as income rises. The standard taper is 20p for each £1 rise in net income (after tax and NI, and the Universal Credit taper). In other words for each extra pound of net income help with council tax is reduced by 20p. The result is that for each £1 earned a total of nearly 74p disappears in tax, NI, reduced Universal Credit, and reduced Council Tax Support. The calculation is at the foot of this blogpost. 

Localism

In some areas of England and Wales the reduction for every £1 of income earned may be even higher as local councils struggle to save money by raising the taper from 20% to as high as 30%. In areas which raise the Council Tax Reduction taper to 25% householders on Universal Credit who pay tax will find that 77p of each pound earned disappears in deductions. In areas with a 30% taper they will lose nearly 79p and keep barely 21p for each extra pound earned after deductions for income tax, National Insurance, Universal Credit taper, and lower Council Tax Reduction. 

A new way of calculating council tax reduction is to put income into bands and only change the reduction as income crosses from one band into another. If extra earnings do not change the band of earnings then the council tax reduction taper is effectively zero. However, if it does move income across a band the taper can be a lot higher than 20%. About one in four councils in England now use a banded scheme.

Pension contributions

Everyone who earns over £10,000 a year (£192 a week) has to be enrolled in a company pension scheme. They can opt out but most do not. The standard contribution for employees is 5% of pay and this is deducted along with tax and national insurance and it is this amount net amount to which the taper applies. However, the 5% (and 3% from the employer) is paid into a pension fund so remains the property of the individual. Calculations in this blogpost ignore these contributions but their deduction does affect net income. 

Students

Students with a Plan 1, Plan 2. Plan 4 (Scotland only) or Plan 5 student loan make repayments of 9% of on every pound they earn above a threshold (currently £501 a week for Plan 1, £547 a week for Plan 2, £629 a week for Plan 4, £480 a week for plan 5, and £403 for a postgrad loan). That is in effect an extra 9% tax (6% for postgrad loans). However it is not counted as a tax for Universal Credit calculations. So it is taken off the final figure after that calculation. Graduates whose income is low enough to be entitled to Universal Credit lose typically 83p in the extra pound keeping just 17p, if they pay council tax.

It is a tax

Some people object to the deductions made from a means-tested benefit being called a 'tax'. They say that the taper rate reduces a subsidy from taxpayers is not a tax. Tax, they say, means a levy on your own money not a reduction in the money the state gives you. 

But it is a tax. And officially so. In his Spring Budget, 8 March 2017, Chancellor Phillip Hammond confirmed that the tapered loss of this benefit was a tax. He confirmed the reduction in the taper rate by saying "the Universal Credit taper rate will be reduced in April from 65% to 63%, cutting tax for 3 million families on low incomes." These words were echoed by Chancellor Rishi Sunak in his Autumn Budget on 27 October 2021 "This is a tax on working people -- and I'm cutting it from 63 to 55 per cent...Let us be in no doubt: this is a tax on work. And a high rate of tax at that."

So it is a tax. And a high one. 

Conclusion

Losing 74% of each extra pound you earn is hardly an incentive to work or to work more hours. It is the highest marginal tax rate in the system aside from the reduction in child benefit for those who earn £60,000 to £80,000 a year and have at least ten children. It is far more than the 42% tax and NI deductions for higher rate taxpayers with incomes over £50,270, more than double the minimum wage. And more even than the highest marginal rate of income tax in Scotland which can reach 68% for those earning £100,000 to £125,140.

TOTAL DEDUCTIONS FOR A TAXPAYER HOUSEHOLDER FOR EACH £1 OF EXTRA INCOME WITH 20% COUNCIL TAX TAPER, IGNORING PENSION CONTRIBUTIONS AND STUDENT LOAN REPAYMENTS.

Earns extra		£1.00
Tax	20%	-£0.20
NI	8%	-£0.08
Net after tax		£0.72
UC reduction	55%	-£0.40
Net after UC		£0.32
CTR cut	20%	-£0.06
Net gain		£0.26

So earn extra £1 and keep just 26p. 

An effective tax rate of 74%

9 April 2025
Version 4.5

This blogpost replaces the one originally published 19 September 2012 and revised in October 2022 and subsequently.

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FILL THAT GAP - if you reach pension age from 6 April 2016 - DEADLINE EXTENDED

UPDATED 9 April 2025

These rules apply to men and women born 6 January 1954 or later. If you are older than that it is too late to fill gaps in your National Insurance record. 

You need 35 years of National Insurance contributions to get a full new state pension. If you have fewer than 35 years National Insurance contributions you will get a reduced pension. So if you have 21 years you will get 21/35ths or 60% of a full pension. If you have less than ten years you will get no pension.

It may be possible to pay some extra contributions now to fill some or all of that gap. They are called voluntary Class 3 National Insurance contributions. 

Contributions at work

You will have paid National Insurance contributions by being in work and paying full Class 1 contributions. You may not even have noticed as they are just deducted from you pay. If you earned very little then no National Insurance contributions would have been paid. If you earned too little to pay them you would possibly have been credited with them. 

Reduced rate contributions paid by some married women do not count. If you have gaps caused by paying those contributions you cannot fill them. It was a very unfair system but nothing can be done about it now.

If you were self-employed and paid Class 2 contributions they count towards your pension equally with Class 1 and you can fill gaps with cheaper Class 2 contributions now.

Credits

Some people who did not pay contributions were credited with them. The rules about credited contributions are very complicated. But broadly speaking you may be able to get credits for years you 

• Got child benefit for a child under 16 (that changed to under 12 from 2010)
• Were unemployed and looking for a job. Usually you would be on Jobseeker's Allowance - but you may get credits even if you were not 
• Were on employment and support allowance, or were eligible for it, or got statutory sick pay
• Received working tax credit 
• Cared for someone who was sick or disabled
• Got maternity or paternity benefits 
• Were male and did not work in the few years approaching the age of  65.

Some credits are given automatically; others have to be claimed. The gov.uk website publishes a full list of credits and which have to be claimed. There are also details of how to check your record. It is all ridiculously complicated but can be very worthwhile!

If you find you still have gaps in your National Insurance record and you have less than 35 years contributions you may be able to fill them now. 

Six years back

You can pay contributions back to 2019/20. Each tax year from then will cost you £923. You cannot buy contributions for the tax year in which you reach state pension age or any later year. 

Should you pay?

It is complicated to decide if it is worth paying to fill gaps. If you can do so it is always worth filling gaps up to 35 by paying contributions from 2019/20. And it may be worth ensuring you pay contributions even if you have 35 years contributions and you have spent some time paying into a good company or public sector pension scheme. That is explained in another blogpost.

In exchange for one year's contributions you will get extra pension at 2025/26 rates of £6.58 a week (£342.09 a year) from the date you pay. So the payback time for the cost of the contributions is about two and a half years though it is more than three if if you pay basic rate tax and over four if you pay higher rate tax. 

It is essential to check before you pay. If you have not reached state pension age contact the Future Pension Centre on 0800 731 0175 or the Pension Service on 0800 731 0469 if you are over pension age.

How to pay

You can pay online on the gov.uk website but check carefully first if it is worthwhile to do so as you cannot get contributions back once you have paid them even if they do you no good. 

More Information

Paying Class 3 voluntary national insurance contributions

Extending the deadline to pay to April 2025

9 April 2025
vs. 3.50

TARGET 221 - BOOST YOUR NEW STATE PENSION

UPDATED for the 2025/26 tax year. All rates are those paid from 7 April 2025.

More than a million people who reach state pension age in the years from 6 April 2016 will not get the full amount of the new ‘flat-rate’ state pension - currently £230.25 from 7 April 2025.

But many of them could boost their pension towards or up to the full flat rate amount.

This guide is for men and women born 6 January 1954 or later who paid into a good pension at work or, in some cases, into a personal pension. . People born earlier than that can get the new pension but it is now too late to boost it if it has been reduced.

It is complicated - don't blame me I didn't invent the rules! But please persist, as it could make you better off for the whole of your retirement.  

There are other groups who may not get the full new state pension because they have paid less than 35 years of National Insurance contributions. They may be able to boost their state pension by paying extra contributions now. This piece does not cover that issue. Use the links at the end.

NEW STATE PENSION

The new state pension was supposed to be simple. A flat-rate amount for everyone who had at least 35 years of National Insurance contributions. This year 2025/26 that amount is £230.25.a week (£11,973 a year) and is taxable. However, there are around one and a half million people who will reach pension age between 2016/17 and 2026/27 who will get less than that even if they have 35 years or more National Insurance contributions.

That is because an amount is deducted from the new state pension for every year they paid into a good pension at work. I call it a contracted out deduction because they were ‘contracted out’ of part of the state pension called SERPS or State Second Pension (S2P). They paid lower National Insurance contributions and instead of that additional state pension they get a pension from their job which was supposed to replace it. The Government prefers to call it 'Contracted Out Pension Equivalent' or COPE. It is that COPE amount that is deducted from your new state pension.

This group includes most people who worked in the public sector, such as

• nurses, doctors, and others in the NHS
• teachers in schools and universities
• police officers and fire brigade staff
• civil servants
• local government workers
• armed forces
• Post Office workers

It also includes many people who worked for one of the privatised industries such as British Airways, British Rail, British Steel, and Royal Mail.

Another large group affected are people who worked for a private sector employer who paid into a good scheme at work that promised them a pension related to their salary. They used to be called ‘final salary’ schemes and nowadays are called Defined Benefit or DB schemes. In the past many large firms ran such schemes. There are still more than 5000 of them and if you paid into one at any time from 1978 your new state pension will be reduced.

Also included are some people who paid into a personal pension and who were persuaded to contract out of part of the state scheme – at the time it was normally called ‘contracting out of SERPS’.

For all these people their new state pension will be reduced to take account of the years they paid into a contracted out pension scheme. That deduction applies even if they have paid the 35 years which is needed to get a full pension – the deduction is made after the full pension is worked out. It can also apply even if they were contracted out for a short period and paid in 35 years or more when they were not contracted out. These deductions can be very large but normally can never leave you with less than £176.45 a week which is the amount of the old basic state pension.

Please do not ask me why that is fair! It may not be fair, but it is the law. The good news is that you can reduce that deduction and, depending on your age and the amount deducted, you may be able to boost your pension towards the full flat-rate of £230.25, though at the moment the maximum bost falls a little short of that.

THE DEDUCTION

If your new state pension has an amount deducted from it because you spent some time paying into a good pension scheme at work then you can reduce that deduction or even wipe it out. It will help even if you already have 35 years of National Insurance contributions or more.

If your new state pension is reduced because you paid into a good pension scheme at work then every year of National Insurance contributions you pay or have credited from 2016/17 to the year before the tax year in which you reach state pension age - currently 66 for everyone - will mean that deduction is less.

If you work and earn more than £125 a week you will get contributions credited or paid to your account (you start actually paying for them when you earn above £242; under that they are credited). If you get child benefit for a child who is less than 12 years old then you will also get a credit for each week. If you get universal credit, jobseeker’s allowance, employment and support allowance, or working tax credit then you will get a credit for each week you get that benefit. You can also get credits if you are a carer in some circumstances. Check here for more details of who can get credits. Some are given automatically, others have to be claimed.

If you are self-employed then up to 2023/24 you paid what are called Class 2 National Insurance contributions if your profits were £12,570 or more. They were £3.45 a week (£179.40 a year). If your profits are between £6725 and £12,750 you will be given a credit. If your profits are up to £6724 you can pay these contributions voluntarily - but only for years in which the were genuinely self-employed. In previous years there were no credits paid and the threshold for paying was just below £6845 a year. 

If you will not pay National Insurance contributions at work or as self-employed or get credits for them then you can pay voluntary contributions, called ‘Class 3’. They will cost you £17.75 a week (£923 for a year). For each extra year of contributions your pension will be boosted by £6.58 a week (£342.09 a year) so the payback is rapid – two years and seven months for non-taxpayers; nearly three and a half if you pay basic rate tax; four and a half for higher rate taxpayers, and nearly five for top rate 45% taxpayers. 

A special concession on rates and backdating ended on 5 April 2025. 

The new state pension was increased to £230.25 a week from 7 April 2025 rising according to the triple lock of earnings, prices, or 2.5%. Earnngs rose most so the pension rose with them by 4.1%. 

If you have paid some contributions at work or as self-employed during the tax year but you are short of a full year you can pay individual weeks through Class 3 (or Class 2) to make your record up to a full year.

You can only pay Class 3 contributions for the years before the tax year in which you reach state pension age. That limits the number of years you can pay to boost your pension. The table show which years you can pay Class 3 contributions to set against the contracted out deduction and the maximum boost that should give to your pension. Your pension cannot be boosted to more than £230.25 a week and it will not ever be reduced to less than £176.45. But the maximum boost availalbe is £46.05.

BOOSTING A NEW STATE PENSION THAT IS SUBJECT TO A CONTRACTED OUT PENSION EQUIVALENT (COPE) DEDUCTION

Reach State Pension Age in					Years you can pay	Maximum pension boost (2025/26 rates)
	Men and women born
2019/20	from 6 January 1954		to 5 July 1954		1	£6.58
2020/21	from 6 July 1954		to 5 April 1955		2	£13.16
2021/22	from 6 April 1955		to 5 April 1956		3	£19.74
2022/23	from 6 April 1956		to 5 April 1957		4	£26.31
2023/24	from 6 April 1957		to 5 April 1958		5	£32.89
2024/25	from 6 April 1958		to 5 April 1959		6	£39.47
2025/26	from 6 April 1959		to 5 April 1960		7	£46.05

NEXT STEPS

You can only pay voluntary Class 3 contributions in the current tax year or the six years before that. A concession that allowed earlier gaps to be filled ended on 5 April 2025.So from 6 April 2025 the earliest year you can pay is now 2019/20. 

If you will reach state pension age in 2025/26 you may want to act soon to see if you can boost your pension by paying National Insurance contributions for the six years 2019/20 to 2024/25. That could give you an extra £46.05 a week on your pension.

The Government has introduced a new service to help you check your state pensioncheck your state pension and boosting it. Sadly it only works for people under state pension age. Even those within four months of pension age cannot use it. Instead you should phone the DWP’s Future Pension Centre on 0800 731 0175 and ask for help or advice about paying extra contributions. Have your National Insurance number with you. Ask what your ‘starting amount’ is and ask if there is a deduction for being contracted out. If your starting amount is less than £230.25 and there is a contracted out deduction then you may be able to boost it using the information in this guide. 'Starting amount' is explained in the notes below. If you have a deduction for a pension which you cannot trace use the Government's free Pension Tracing Service.

In the past, many people have contacted the DWP and been told they cannot boost their pension because they already have 35 years or more of contributions. That is incorrect. Some officials seem to be confusing this scheme with one to fill gaps in your contribution record. Others have been told that they need more than 35 years to get a full pension. That can be true in the circumstances in this blogpost, but it is a confusing way to put it. 

You may get more sense from the free and excellent Money Helper website or call on 0800 011 3797. Beware of similar sounding commercial organisations.

You can check your starting amount at this Government website. You will have to go through security procedures which can be a pain. Make sure it includes your 2015/16 contributions. This website may let you see how you can boost your pension by paying extra National Insurance contributions. 

NOTES

1. All the rates in this guide are correct in 2025/26. 

2. If your income is low then you may get extra money from pension credit or help with your council tax or rent (rent or rates in Northern Ireland). If you buy Class 3 contributions to boost your pension those benefits will be reduced but it will almost always still be worthwhile.

3. Your ‘starting amount’ is the calculation of how much state pension you have built up at 6 April 2016 under the old and the new rules. Your starting amount is the one that is bigger. It will take account of National Insurance contributions paid up to 2015/16 and will also make a deduction for years you have been ‘contracted out’ of part of the state pension system called SERPS. If it shows that you have fewer than 35 years of National Insurance Contributions then you may be able to pay to fill gaps back to 2019/20 to boost that number. But always check if it is worthwhile to do so - see  Filling gaps in your National Insurance record – new state pension. 

4. SERPS, the State Earnings Related Pension Scheme, was an earnings-related supplement to the basic state pension. People paid into it as part of their National Insurance contributions from April 1978 to April 2016. From April 2002 it was changed and renamed State Second Pension (S2P). It was SERPS and S2P – officially called ‘additional pension’ – which people ‘contracted out’ of if they paid into a good pension at work or in some cases into a personal pension which they chose to ‘contract out’. They paid lower National Insurance contributions. The pension they paid into was supposed to replace the SERPS or S2P but it does not always do so in full. 

5. Tax years run from 6 April one year to 5 April the next. So 2025/26 runs from 6 April 2025 to 5 April 2026.

6. If you have an old company or personal pension you cannot trace, use the Government's free Pension Tracing Service.

7. Contracted Out Pension Equivalent (COPE) is the amount deducted from your new state pension to take account of the time you were contracted out of SERPS/S2P. In theory the amount deducted should be paid to you by the pension scheme you paid into as part of being contracted out. But that will not always happen especially if you were contracted out into a personal pension. This government guide to contracting out sort of explains it.


BOOST YOUR PENSION GUIDES FOR OTHER GROUPS

Men born 6 April 1951 or later and women born 6 April 1953 or later.

·       Filling gaps in your National Insurance record – new state pension 

Men born before 6 April 1951 and women born before 6 April 1953

·        It is now too late for you to fill any gaps in your National Insurance record – old state pension 

·        

Version: 8.0

9 April 2025

Previously: Target 203, Target 155, Target 164, Target 169, Target 175, Target 179, Target 185

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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 English quarter days when rent and other payments fell due. The quarter days (in England and Wales) are

• March 25 (Lady Day)
• June 24 (Midsummer Day)
• September 29 (Michaelmas Day)
• December 25 (Christmas Day)

Oddly, those quarters are 91, 97, 87, and 90 (91 in a leap year) days long. And the quarter days are very different in Scotland and Northern (and the rest of) Ireland.

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 eleven days are 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 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 - even HMRC has offered it - 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 1899-1900 and the question did not arise in 2000 as it was divisible by 400 and so was a leap year. 

The meaning of '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 does now.

Excel

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 1-2-3, the spreadsheet which dominated the market in the 1980s and 90s which also had this error. Microsoft wanted its new rival spreadsheet Excel to be compatible with Lotus 1-2-3 so it kept this error. Excel will also not deal with any earlier dates so don't expect any help when using it to calculate in the 19th or previous centuries. 

Paul Lewis

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