Income Tax in Britain (1799)
Fun Facts on Taxation Roots: Income Tax in Britain (1799–1860)
To fund the war against Napoleon, Britain introduced income tax in 1799. It was a temporary measure that was supposed to last until the end of the war but was later reintroduced and became a permanent fixture.
According to moneyweek.com in the 1790s, during Britain’s war with Napoleon, a pressing need for cash arose. Consequently, on a significant day in 1799, Prime Minister William Pitt the Younger introduced a 10% levy on all income exceeding £60. The government contemplated taxes on spending (similar to modern-day Canadian GST) and property but ultimately opted for an income tax. This tax was intended to apply to the entirety of Great Britain, excluding Ireland, and was considered a temporary measure.
With Britain immersed in continuous warfare with France for over six years, the financial strain was palpable. The Royal Navy, facing substantial expenses, played a crucial role in patrolling the seas to curb the success of the Republic of France. The Battle of the Nile marked a victory for the Royal Navy against Napoleon’s fleet, but the financial burden was taking a toll on Pitt’s government.
Income Tax Act of 1799
The Act of 1799 stipulated a 10% levy on income exceeding £60, with reductions for incomes up to £200. Children enjoyed a reduced rate of up to 5% on their earnings. Payments were structured in six equal installments starting from June that year. Pitt aimed to raise approximately £10 million based on an estimated total taxable income of £100 million. However, the actual collection fell short, reaching only around £6 million, despite the appointment of tax inspectors or “general commissioners.”
income tax resurfacing in 1803
Unsurprisingly, the income tax faced opposition from voters. When a peace treaty was signed in 1802 under Prime Minister Henry Addington, the tax was discontinued. However, peace was short-lived, and the income tax resurfaced in 1803 with the renewal of war. The tax endured throughout the Napoleonic Wars and was only abolished in 1816, a year after Napoleon’s final defeat. In response to public demand, the Chancellor of the Exchequer ceremoniously burned all government records of its existence.
Reintroduction in 1860
Subsequently, the income tax was reintroduced during the Crimean War by statesman William Gladstone in the 1860s. By that time, income tax had become a perceived but inevitable aspect of life, a sentiment that persists to this day. Globally, other countries followed suit, with the United States introducing income tax in 1861 to fund soldiers and arms, anticipating the possibility of a civil war.
Thank you for joining us on this exploration of accounting history and reading this post until the end.
We appreciate your comments, likes, and sharing with friends and colleagues. For more insights and a free consultation, visit 777taxes.com and call us at (416)857-7570. Subscribe on our YouTube channel: https://www.youtube.com/@777taxes GMB profile: https://maps.app.goo.gl/HgfQdsenRFaaXtNY9
Your success starts with informed tax strategies!
#IncomeTax #Accounting #TaxationHistory #777Taxes #BusinessRoots #TaxHistory #EntrepreneurialJourney #BusinessFinances #Taxes