Ever wondered why we have a Budget each year and why the tax year end on the illogical date of 5th April? Well, the reasons are rooted deep in history, and the reasons for some cornerstones of the tax system now seem irrelevant and it’s no wonder we have such a convoluted, arcane tax system.
It all stared in November 1799 when Napoleon staged a coup, and he ultimately became Emperor of France. In response to France’s expansionist wars under Napoleon, William Pitt the Younger introduced income tax as a temporary measure to fund the war against Napoleon.
The new income tax was a temporary measure and so it was given a life on a year. Consequently, each year, there must be an Act of Parliament to renew it just in case Napoleon starts raising armies in France again (and of course the annual Budget is now a precursor to the subsequent Finance Act).
OK, so we’ve had a “temporary tax” for 224 years now to fight a war long settled, but what about the nonsense of 5th April?
Well for that one, we must go back well into the Dark Ages possibly even earlier. Before the fall of the Roman Empire, most of Europe had 1st January as the start of a new year. After the fall of the Roman Empire in AD476, England slowly began to shift the start of the new year to 25th March. This was because it was the Feast of the Annunciation, when the Archangel Gabriel told Mary that she was with child (significant because it was 9 months before Christmas).
England officially moved to 25th March as the start of a new year in the 13th century.
All well and good so far.
But at that time, the Julian calendar was in use (so called because Julius Caesar invented it) and it had 365.25 days in a year. Pope Gregory changed the calendar in1582 to a more accurate 365.2525 days in a year.
England was fiercely anti-Catholic at the time and so did not change to the Gregorian calendar until 1752, by which time there was a 10-day difference between the calendars. That meant the Government would miss out on 10 days of tax revenues unless, when it switched to the Gregorian calendar, it went for 4th April as the start of the new tax year.
To further complicate matters, the year 1800 was not a leap year in the new Gregorian calendar but it was in the old Julian calendar. So as not to miss out on one day of tax revenue, the Government pushed the start of the new tax year back by a day to 5th April.
The whole story of 5th April while interesting does reveal so much that is wrong with our tax system – unnecessarily complex, derived from history, and has little or no relevance to today’s world and full of arbitrary fudges and fixes that just leave the average person in the street utterly bemused!