UK Income Tax – How It All Began
In the United Kingdom, a tax on income (Income Tax) was first announced in 1798, and introduced into our lives the following year. It was introduced primarily as a way of raising monies to pay for the war Britain was fighting against the French forces under Napoleon Bonaparte. France was threatening to invade our shores, and had already landed briefly in Wales and Ireland.
For many of his campaigns Napoleon was better organised than the British forces and the cost of war had drained Britain’s resources. The country at that time was in considerable debt, the army was starving, and we were suffering poor conditions in the navy, which, in 1797, had led to mutiny.
So something clearly had to be done to raise some much needed cash and William Pitt the Younger, the then Prime Minister, called for an ‘aid and contribution for the prosecution of the war’.
Aptly titled ‘Certain duties upon income’ were outlined in the Act of 1799 and were intended to be a temporary solution, a kind of tax to beat Napoleon. Income tax was to be levied throughout Great Britain (but not Ireland) at a rate of 10% on the total income of the taxpayer and from all sources above £60, with reductions on income up to £200.
Once calculated, the tax was to be paid in six equal instalments from June 1799, with an expected return to the government of the day of £10 million in its first year. It actually realised less than £6 million, but the money was nevertheless vital and set a precedent which still holds today!
William Pitt resigned as Prime Minister in 1802 over the question of the emancipation of Irish Catholics, and was replaced by Henry Addington. There followed a short-lived peace treaty with Napoleon allowing Addington to repeal income tax, a popular measure throughout the land. However, renewed fighting led to a new tax act in 1803, which really set the pattern for income tax today.