Happy 6th April - the first day of the new (tax) year in the UK.
I agree - it's a bonkers system we have that means for the 5 million+ of us who are self-employed or doing personal tax returns, we can't divide up our income and receipts neatly according to the annual cycle of one calendar year ending on Dec 31st, and the next year starting on Jan 1st - or even according to the quarterly cycle of 3 months used by HMRC for VAT returns.
It's bonkers-ness is also compounded by limited companies being able to (re)align their accounting periods to line up with the calendar year, but not us as freelancers and sole traders.
There's a good comprehensive story telling of why the 6th April is the date that the government has decreed should be the start of the year for tax purposes over on the Tax Advisory Partnership's website
(TL:DR and spoiler alert: it's to do with Britain wanting to have it's own calendar system that was at odds with the one that the rest of the world had adopted, and the Treasury wanting to max out on what it could demand from us as hard working people).
But then add in a few extra oddities about the tax system here in the UK. For example:
- VAT can be charged at 3 different amounts (and it being added to the price we pay depends on who we are, what we're using it for, and other factors)
- National Insurance contributions are deducted from our earnings at 4 different levels (depending on who employs us, and how)
Further, for organisations, add into this things like business rates on commercial premises which are managed by local authorities (so what you pay in one neighbourhood may be markedly different to what you pay in an adjoining town for the same space).
And if you drive a car, then you're paying taxes on:
- the purchase cost of the car,
- annual car tax,
- tax on the fuel you use to travel around in it;
- tax on any repairs or parts you buy for it,
- tax on the insurance you have for it.
Is it any wonder that (1) most people are confused about tax and the tax that they owe; and (2) that most people therefore try and avoid paying tax in light of our paying so much of it everywhere all the time (with little apparent benefit to us or the wider community)?