The Office of Tax Simplification (OTS) has published a report outlining the benefits of adopting a tax year end that is aligned with a calendar month-end.
Feedback from our users points to the 5 April tax year end date being confusing and challenging for many taxpayers, particularly those groups who are relatively new to the UK tax system. It can also cause administrative difficulties for individuals when attempting to align financial transactions from monthly transactions to the income tax year.
Based on the OTS paper, and the opinions of untied users, a move away from the current tax year end date to 31 March would be welcomed.
We note, however, that year ends are not just about businesses. People who are self-employed have other income including investments. While having the ability to manage taxes to a 31 March year-end is attractive to businesses, confusion will persist unless all sources move to the same cut-off.
We are also aware of potential significant unintended consequences.
We appreciate that such radical reforms might need to be implemented after the April 2023 introduction of Making Tax Digital for income tax and be accompanied by well-thought-out transitional year arrangements. However, in the shorter term, introducing arrangements that extend equivalence of treatment to accounting periods ending between 31 March and 5 April could benefit many businesses and lead to more standardisation and greater simplification in the longer term.
Jonathan Yeomans, head of tax at untied says: “At the end of the day, the UK has a 5 April tax year end date because of a quirk in history that goes back over 250 years. This date is no longer relevant to modern society. The Isle of Man is the only other tax jurisdiction in the world that uses this date. This quirk may persist, such as which side of the road we drive on and different rail gauges. Or we may see change - decimalisation and adoption of metric measures achieved significant simplification and alignment. If the tax year changes, some will celebrate, and others will bid 5 April a sad farewell – both with a pint!”
untied supports reform that makes taxes easier for people to get right and have responded accordingly to the consultations around the UK tax administration framework, timely payment and basis period reform.
For further information:
Chantal Heckford email@example.com