THE TAX YEAR

As wealthy British taxpayers contemplate the new 50% income tax rate for those earning more than £150,000 a year, ordinary folk may wonder why the tax year in the U.K. starts today, 6 April. Having a tax year which is different from the calendar year is, in itself, not that unusual; most states in the U.S., for instance, have fiscal years which start on 1 July, and the Federal Government's begins on 1 October. However, picking a date in the middle of a spring month would strike many as being particularly odd.

The answer, as with many things in Britain, lies in history. Back in the days before income tax, which was introduced as a "temporary" measure to fund the Napoleonic Wars, the most important taxes were land and property taxes. These were usually paid by way of a downpayment on Lady Day (25 March), the start of the new year, followed by a reckoning of the account at Michaelmas (29 September), after the harvest was in. This system was in place for many centuries.

Things then got a bit complicated following the change from the Julian to the Gregorian calendar. This change, promulgated by Pope Gregory XIII in 1582 in order to align the date of Easter with what the Church thought had been agreed at the first Nicaean Council in 325, adjusted the calendar by making three out of every 4 centurial years common years instead of leap years (so 1600 and 2000 remained leap years, whereas 1700, 1800 and 1900 were no longer). In order to adjust for the misalignments of previous centuries, 10 days were simply dropped.

Most Catholic countries followed the Pope's instructions immediately; but Protestant countries such as Britain did not. Britain eventually altered its calendar in the mid-18th century, by which time the necessary adjustment had increased to 11 days; Wednesday 2 September 1752 was immediately followed by Thursday 14 September 1752. However, tax authorities being what they are (i.e. loth to lose anything), the start of the tax year was pushed forward 11 days, from 25 March to 5 April. In 1800, when the next Julian leap year had to be dropped, it was pushed forward one day more, to 6 April. There it has stayed ever since, despite there being a Julian leap year in 1900.

The rather odd date doesn't matter so much in practice, since income earned in (say) June is deemed to be earned in the month 6 June to 5 July; while companies pay VAT and corporation tax on a calendar month basis. In fact, the people who really have problems are historians, who have to grapple with different calendars in different countries over a period of centuries. In Europe, the last country to adopt the Gregorian calendar was Greece, and that was not until 1923!

Walter Blotscher