Does Moving the Tax Year Make a Difference for Landlords?

Boffins at the Office of Tax Simplification are looking at moving the tax year to a more convenient date, but the change is unlikely to make any difference to the tax landlords pay. 

The OTS is considering two new dates for the tax year end – March 31 or December 31. 

The current tax year runs from April 6 to the following April 5.

 Changing the tax year to end on December 31 would align tax affairs in the UK with those in most other developed countries, although many – including several Commonwealth nations – have a June 30 tax year-end.

Why does the UK tax year end on April 5?

April 5 seems to be a random day to choose for the end of the tax year, but there is a historical reason why April 5 was picked – and it’s all to do with money. 

The story started in 1582 when Pope Gregory XIII replaced the Julian Calendar. The Julian Calendar was put forward by Julius Caesar in 46 BCE but had lost at least nine days over the 1,500 years or so of operation. But England was out of step with the rest of the world and kept the Julian Calendar until September 1752, when another two days had been lost. 

The catch-up day was September 2, 1752, which became September 14, 1752, overnight. To ensure the Treasury lost no revenue, the ‘lost’ 11 days were tacked on to the end of the tax year, which traditionally started on Lady Day (March 25). 

The moved tax year started on April 5. One more change took place to see the tax year end on April 5 and begin on April 6. 1800 caused a problem as it was a leap year in the Gregorian Calendar but not a leap year in the Julian Calendar. 

The Treasury decided to move the tax year end forward another day to compensate, and the dates have stayed the same.

March 31 tipped as the new tax year-end

The review will focus on the benefits of changing the tax year end to March 31 says a policy paper from the OTS. The government already uses the date as the official year-end for its accounts.

It’s also the nearest month-end and quarter-end to the current tax year-end and the critical date for corporation tax returns. The OTS is considering a transitional year when the date changes that would be five days shorter than the standard tax year, running from April 6 until the following March 31.

December 31 - close but no cigar

The OTS review will consider December 31 as the new tax year end to align the UK with the USA, France, and Germany. If this were to happen – which is unlikely – the transitional year would be three months and five days shorter, from April 6 to December 31.

Read the OTS policy document for changing the tax year-end

How would moving the tax year impact landlords?

Landlords are taxed depending on their individual or corporate status. Changing the tax year would have little or no effect on corporate landlords as companies already work to the March 31 date for tax returns. 

Companies can nominate their tax year within certain limits and then apportion their profits to match financial years. Individual landlords work to the April 5 year-end, and HM Revenue & Customs allows them to blur the first five days of April for accounting purposes to avoid complicated maths when apportioning monthly income and expenses.

The change could change the tax status of some non-resident landlords who must count the days they spend in or out of the UK to determine their residence, but HMRC is likely to legislate for this in any transitional arrangements.

Tax year-end change FAQ

Which calendar does the UK operate currently?

The UK switched to the Gregorian Calendar in September 1752. The British Empire also changed calendars on this date, including much of the east coast of North America.

What tax year end have other major economies adopted?

The world’s top five economies are China, the USA, UK, France and Germany. All the others except the UK have a December 31 tax year-end.

What are the benefits of changing the tax year end?

The main benefit of changing the year-end is that everything tax suddenly becomes less complicated and easier to calculate. Now, accounts are kept monthly and adjusted to match the tax year, which involves some simple maths but opens the potential for making mistakes that can lead to tax over or underpayments. 

A tax year end that aligns with a month end makes life a lot easier for accountants and bookkeepers but should make no difference to the amount of tax someone pays.

When is the change likely to happen?

No one knows when the likely change date is expected to happen or if the date will change. The OTS must produce a review, make recommendations, and then go before the government and MPs for a decision. The process could take several years.

What is a transitional year?

A transitional year is when the tax year end changes and the timing calls for some adjustment to shorten or lengthen the year. For instance, if the transition to March 31 happened in the 2025-26 tax year, the most likely scenario would be to shorten the year from April 6, 2025, to April 5, 2026, to April 6, 2025, to March 31, 2026. Subsequent tax years would run from April 1 to the following March 31.