U.K. Personal Tax Filing Deadlines & Why the April 5th Year-end?

Overview

Tax filing deadlines are an important aspect of personal finance in the United Kingdom. Understanding these deadlines is crucial for individuals to ensure compliance with tax laws and avoid penalties. In the U.K., the tax year uniquely runs from 6th April to 5th April of the following year.

Personal Tax Filing Deadlines in the U.K.

In the U.K., individuals are required to file their tax returns annually to report their income, claim deductions, and calculate their tax liability. The deadlines for filing personal tax returns depend on the method of submission.

1. 1. Paper Filing: If you choose to file your tax return on paper, the deadline is 31^st October following the end of the tax year. For example, for the tax year ending on 5th April 2023, the paper filing deadline would be 31^st October 2023.
   2. Online Filing: The majority of taxpayers in the U.K. now file their tax returns online. The deadline for online filing is 31^st January following the end of the tax year. Using the same example, the online filing deadline for the tax year ending on 5^th April 2023 would be 31^st January 2024.

It is important to note that the tax liability for the year is also due by the same deadline, i.e., 31^st January. Failure to meet the filing and payment deadlines can result in penalties and interest charges.

Payments on Account

In addition to understanding the tax filing deadlines, it is important to be aware of the concept of payments on account. Payments on account are advance payments towards the following year’s tax liability. They are made by individuals who have a tax liability above £1,000.

The payments on account system is designed to help individuals spread the cost of their tax liability over the year. The system assumes that an individual’s income and tax liability for the following year will be similar to the current year.

Here are some key points to know about payments on account:

1. Calculation: The amount of each payment on account is calculated based on the individual’s tax liability for the previous tax year. It is typically equal to half of the previous year’s tax liability.
2. Due Dates: Payments on account are due in two instalments. The first instalment is due on 31st January, which is the same deadline for filing the tax return. The second instalment is due on 31st July.
3. Adjustment: When the individual files their tax return for the current year, any difference between the actual tax liability and the payments on account made will be calculated. If the payments on account were more than the actual liability, the excess amount will be refunded. If the payments on account were less than the actual liability, the individual will need to make a balancing payment by 31st January of the following year.
4. Exceptions: There are certain exceptions to the payments on account requirement. For example, if more than 80% of an individual’s tax liability is deducted at source, they may not be required to make payments on account.

It is important to note that payments on account can sometimes result in individuals paying more tax in advance than necessary, especially if their income or tax liability is expected to decrease in the following year. In such cases, individuals can apply to reduce their payments on account.

US taxpayers

For US taxpayers that credit foreign taxes on the ‘paid basis’ it may be advantageous to pre-pay taxes in the UK, e.g. making a tax payment by 31 December instead of following 31 January/July. This is often good practice to manage cash flow but can also be necessary to ensure a credit is utilised on the US tax return.

Why the U.K. has a 5th April Year End

The choice of the April 5^th as the year end for personal tax purposes in the U.K. may seem arbitrary. The April 5^th year end can be traced back to the Julian calendar, which was used in England until 1752. Under the Julian calendar, the new year began on 25th March, also known as Lady Day, and the tax year ended on 24th March, i.e., the Treasury followed the ‘calendar year’.

The Julian calendar lagged the solar calendar, closer tracked by the Gregorian calendar which was adopted by Britian in 1752. When the Georgian calendar was eventually adopted in 1752 there was a 11-day lag between the Julian and Georgian calendar, however the treasury wanted to maintain the usual 365-day tax year and therefore pushed the end of the tax year to 11 days April 4^th.

In the year 1800 because every 100 years is not a leap year in the Georgian calendar [but every 400 years is a leap year], and the recent change from the Julian calendar in which it would have been a leap year, the treasury moved the start of the UK tax year back a day to April 6^th, gaining an extra day’s revenue. The 6^th April has remained the beginning of the tax year ever since.