There are two reasons for this gap which is generally required by building codes.
Should wall tiles be placed directly above baseboard.
Apply an even line of construction adhesive to the.
The baseboard at the bottom of a wall should always be installed slightly raised from the floor s surface.
Start directly next to a door or in a corner and measure the first line of baseboard or quarter round.
Always install the ceramic tile floor before installing the wall baseboard trim.
Expansion joints in the floor.
If you tile up to the baseboards leave a 1 4 gap next to the baseboard and fill the space with caulk that matches the grout.
If you remove the baseboards another option is to replace them with matching bullnose tile instead of wood.
Cut a piece to size with a miter saw.
If the tile floor is in a bathroom or toilet room then yes you really should.
If you replace the baseboards you can stop the tile about 1 4 from the wall and cover the gap with the trim.
As such while tiling directly over wood of any kind is generally frowned upon in the tile industry you can tile over a wood paneled wall as long as the proper adhesives are used because the movement is negligible.
Normally this area is underneath the baseboard trim.