27.04.2016 - GoodyBurrett- A Firm in the Know

April heralds many new beginnings: the sun finally breaking through, spring babies, growth apparent everywhere and very importantly the start of the new financial year.

In some countries the start of the financial year coincides with the calendar year - which seems like a logical date. The UK, however, scrambles to get affairs in order by the fifth of April with the new financial year starting on the sixth. While this seems slightly random, the origins date back to medieval times

In England the four main Christian religious holidays have traditionally been used as the “quarter days” on which debts and accounts had to be settled and rents for land and property had to be paid. Quarter days are still used in many farm transactions and lease payments. The first of these quarter days fell on 25 March ‘Lady Day’ (the date the Angel Gabriel appeared to the Virgin Mary). This date was also New Year’s Day and the first day of the British tax year. The move forward to the 6th April results from changes to the calendar and the recalculation of the number of days in a year.

Until 1582, Europe had used the Julian Calendar (named after Julius Caesar). However, over time problems developed; this was because the calendar did not exactly align with the solar calendar- the time it takes for the Earth to move round the sun. Even though the year was only 11½ minutes longer than a solar year this all added up, and by the late 1500 the Julian calendar was ten days adrift from the solar calendar. The Roman Catholic Church was especially concerned because the celebration of Easter had gradually been getting later than when it had been celebrated by the early church.

In an attempt to resolve the issue Pope Gregory XIII adopted the ‘Gregorian’ calendar in 1582 with three leap days omitted every 400 years.  Although Europe adopted the Gregorian calendar, England, with its historical conflicts with the Roman Catholic Church, did not. 

Owing to this failure to align with Europe, by 1752 Britain was 11 days out of sync. As a result, the decision was made to drop 11 days from September to catch up, and therefore in 1752 September 2nd was followed by September 14th. To ensure that there was no loss of tax the Treasury, unsurprisingly, extended the 1752 tax year by adding on the 11 days at the end. Consequently, the beginning of the 1753 tax year was moved to April 5. 

A further adjustment was made in 1800 making the start of the tax the 6th of April, mitigating the differences between the Julian and Gregorian calendars. The year 1800 would have been a leap year under the Julian calendar but not the Gregorian calendar, so the Treasury treated 1800 as a leap year for purposes of taxation gaining an extra days revenue. The 6th of April has remained the beginning of the tax year ever since.

GoodyBurrett are a firm in the know, having been established for over 300 years. The team are in a great position to advise you on all your legal matters and the impact the changes the new financial year will have impact on you and your businesses. Contact a member of the team on 01206 577676.

Did you know..?

The current Inheritance Tax Threshold is £325,000