For hundreds of years, the tax year has started on 6 April and ended on the following 5 April. Now, in an attempt to simplify tax, the Office of Tax Simplification (OTS) is investigating the possibility of moving it to a new date.

There would be some great benefits to changing the tax year end. Administrative errors when completing tax returns would be reduced while the tax gap could also be reduced.

What date could the tax year end move to?

The OTS has published a document outlining a review into the benefits, costs and wider implications of moving the date to the end of March.

With 31 March being the UK financial year end which government accounting also works to, the OTS is looking to this date as a viable option.

Being the end of the first calendar quarter also makes it favourable. Many accounting systems are based around month and quarter ends making it common to account to a month end date.

The OTS are also considering moving the tax year-end date to 31 December. This is used by many countries including Ireland, USA, Germany and France and with it being the end of the calendar year there is clearly some logical appeal to this option.

If the OTS chose to go with this option the current tax year would be shortened, starting on 6 April and ending on 31 December, to get the change underway.

What are the problems of changing the tax year-end?

Some are in favour of the change, especially those in the property industry, but there are those who have their reservations. A complete upheaval of the UK’s tax and payroll systems and software will create a massive task for tax professionals, HMRC and members of the public alike.

With any big adjustment, there will be implications to consider. There would potentially be a knock-on effect on income Tax, PAYE, National Insurance contributions, Capital Gains Tax and Inheritance Tax while the change comes in.

What do you need to do?

Until a decision is made you don’t need to do anything. We will keep you updated on how this develops. You can keep an eye on our Tax news updates or sign up for our newsletter to get updates straight to your inbox.