The Office of Tax Simplification (OTS) has published a report setting out its analysis of the benefits, costs, and wider implications of a change to the date of the end of the tax year for individuals.
The OTS finds clear benefits in adopting a tax year which is aligned either with the calendar year or with a calendar month-end. Aligning with the calendar year would be the ‘natural, simplest and easiest approach for everyone to understand’ – bringing the UK in line with many other countries and supporting the use of international data for tax compliance purposes. The review also notes the benefits for internationally mobile employees and their employers.
Moving to 31 March would also be ‘much more understandable, align with the UK’s financial year, and assist taxpayers who prepare business accounts or report income from investments’.
However, in either case, the costs would be significant – particularly in terms of the amount of work involved and the impact on government resources, making it much harder to implement other changes at the same time.
The OTS considers that it would not be feasible to change the tax year end date before the scheduled 5 April 2023 start date of Making Tax Digital for Income Tax, although recommends that HMRC consider allowing taxpayers to use a 31 March cut-off date, rather than 5 April, in respect of the calculation of profits from self-employment and from property income, ahead of the implementation of MTD for income tax.
The Office of Tax Simplification (OTS) has published a report setting out its analysis of the benefits, costs, and wider implications of a change to the date of the end of the tax year for individuals.
The OTS finds clear benefits in adopting a tax year which is aligned either with the calendar year or with a calendar month-end. Aligning with the calendar year would be the ‘natural, simplest and easiest approach for everyone to understand’ – bringing the UK in line with many other countries and supporting the use of international data for tax compliance purposes. The review also notes the benefits for internationally mobile employees and their employers.
Moving to 31 March would also be ‘much more understandable, align with the UK’s financial year, and assist taxpayers who prepare business accounts or report income from investments’.
However, in either case, the costs would be significant – particularly in terms of the amount of work involved and the impact on government resources, making it much harder to implement other changes at the same time.
The OTS considers that it would not be feasible to change the tax year end date before the scheduled 5 April 2023 start date of Making Tax Digital for Income Tax, although recommends that HMRC consider allowing taxpayers to use a 31 March cut-off date, rather than 5 April, in respect of the calculation of profits from self-employment and from property income, ahead of the implementation of MTD for income tax.
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