The UK tax year runs from 6 April to 5 April. In this article we look at what the UK tax year is, why the tax year isn’t the same as the calendar year and what you need to be aware of during each tax year.
What is a tax year?
In the UK, the tax year is a period of 12 months running from 6 April to 5 April. Tax allowances such as your personal allowance and ISA allowance follow the tax year and so too do pension tax reliefs. If you file a self-assessment tax return, the tax year is also the time period used for reporting your income and expenses. Pensions that are set to rise in line with inflation – for example the State pension – also usually rise at tax year end as well.
You also hear the tax year referred to as the financial year or fiscal year.
Why does the tax year run from April to April?
That’s a very good question! Much of the world – the US, Germany etc. – keeps things neat by using New Year’s Day to kick off the tax year but not the UK. Yup, it’s another one of our quirks!
It dates back to the days when people in England had to pay rent to their landlords quarterly. The first of these days – 25 March – became the start of the financial year. Over time, with the switch from the Julian calendar to the Gregorian calendar and the axing of a few days to line everything up, the start of the tax year moved to 6 April. There are rumblings that it is being looked at with a view to changing to the 1 April or even 1 January but as it took England 170 years to move from the Julian to the Gregorian calendar, don’t hold your breath.
Oh, and the UK Government’s own financial year runs from 1 April to 31 March. Why? Well, let’s not go there right now!
Why is the tax year important?
The tax year is important for many different reasons. Here are some key points:
- Most tax allowances and reliefs run from April to April and often can’t be carried over so if you don’t use them you lose them. An excellent example is your ISA allowance
- The tax year is also very important if you file a self-assessment tax return
- It can help with your own financial planning and budgeting
Key tax year dates
- 6 April – the start of the tax year. Your new allowances kick in.
- 31 July – this is an important date for those with money to pay the Government via a self-assessment tax return. The second payment on account is due on this day.
- 31 October – the deadline for filing a paper tax return.
- 31 January – a big day. This is the deadline for filing self-assessment tax returns online. It’s also the deadline for paying tax due.
- 5 April – this is the end of the tax year and a really important date if you want to take advantage of certain tax allowances and reliefs you’re entitled to – yes, all you people who pay into your ISA at 11.55pm every year!
If you’ve got any questions about tax allowances or your investments and financial plans, our friendly telephone team is here to help. Just give us a call on 020 7189 2400 or you can book a free investment checkup or talk to a Coach about your pension.