History of tax
Taxation has been around in various forms for a very long time, dating back to the Romans. Notable events in history linked to tax include Lady Godiva's ride through the streets of Coventry in the 11th century in a plea for her husband to reduce taxes.
In the UK, the first instance of taxation being deducted out of a person's income before they had even received the money (called being deducted at source) happened in 1512. It was in 1803 that the schedules of income tax were introduced and they have been largely unchanged ever since.
| 1798 | Prime minister, William Pitt the Younger, announced income tax to fund the Napoleonic wars. This was despite his belief that income tax was repugnant to the customs and manners of a nation. |
| 1799 | Income tax introduced to all of Great Britain (but not Ireland) The rate was 10% on a person's total income above £60 per year. It was to be paid in 6 equal instalments. |
| 1803 | Henry Addington, who later became Viscount Sidmouth, introduces taxation at source as well as a system of Schedules (explained later). Addington's rate of tax was half that of William Pitt's but the changes Addington introduced ensured that revenue rose by half and the number of people paying tax doubled. |
| 1806 | The taxation rate rose to 10%, the original level it was introduced at by William Pitt. |
| 1816 | All tax records were burned after income tax was repealed a year after the Battle of Waterloo. The critics of income tax won the day but what they didn't know was that duplicates had been sent to the King's Remembrancer. |
| 1842 | Income tax is brought back by conservative Prime Minister Sir Robert Peel. He had opposed income tax but faced with a growing deficit, he had no choice but to spring a surprise and re-introduce income tax. Peel decided to only tax those with incomes greater than £150. This meant that the less wealthy benefited. |
| 1849 | The Board of Excise was added to the existing Board of Taxes and Board of Stamps to create the new Board of Inland Revenue. The Board of Excise moved away from the Board of Inland Revenue in 1909 (to the Board of Customs). |
| 1874 | Although it was widely thought that income tax would be removed when Disraeli was returned as Prime Minister, income tax stayed. This was despite the fact that income tax contributed only £6 million to the Government revenue of £77 million. Most of the population were exempt. |
| 1907 | Herbert Asquith, the chancellor, introduces a number of different income and investment taxes. One of these was the concept of differentiation, taxing less on earnings than on investments. |
| 1918 | The standard rate of tax increased to 30%, bringing in £257 million on top of the £36 million from the super-tax. In addition, there were other taxes such as Excess Profits Duty. In all, the taxes collected amounted to more than £580 million, which was 17 times the amount in 1905. |
| 1920 | A Royal Commission was set-up to look into income tax and the super tax. It concluded that they should remain. |
| 1930 | With a population of 45 million, 10 million were taxpayers. |
| 1939 | The standard rate of income tax is 29% with a surtax of 41% for incomes over £50,000. Ten million people were taxpayers. The amount raised was £400 million. |
| 1945 | Due to a rapid rise in the number of taxpayers, the threshold at which taxpayers pay tax is lowered and the rates of tax increased. This is done to pay for the war effort. |
| 1944 | The Pay tax As You Earn system (PAYE), is introduced. This replaced annual or twice yearly collections. Tax was deducted by employers and when an employee left an employer, they were given a P45 which had on it their code number, income to date and tax paid to date. The P45 was given to their new employer. The scheme had been piloted by Sir Kingsley Wood but on the day it was to be announced, he died. By the end of January 1944, 15 million people earning £100 a year or more, received notices telling them their code number. |
| 1965 | Capital gains tax is made part of the tax system by James Callaghan, as is corporation tax. James Callaghan, later to become Prime Minster, had worked for the Inland Revenue. |
| 1973 | Value Added Tax, VAT is introduced. The super tax (surtax) as introduced in 1909, was removed in this year but replaced by higher rates of income tax for those with high incomes. |
| 1992 | The Queen elects to pay tax on her income in a move designed to bring her closer to the people. |
| 1996 | The introduction of Self-Assessment. It is designed for people with more complex tax affairs including those who are self-employed, business partners, company directors and those paying tax at higher rates. It is not a new tax but a new system. More than £25 million is budgeted for the advertising and public awareness campaign for Self-Assessment. |
| 1998 | The bicentenary of income tax in the UK. |
Timeline of Chancellors
| 1783-1801 | William Pitt |
| 1801-1804 | Henry Addington |
| 1804-1806 | William Pitt |
| 1806-1807 | Henry Petty |
| 1807-1812 | Spencer Perceval |
| 1812-1823 | Nicholas Vansittart |
| 1841-1846 | Henry Goulburn |
| 1846-1852 | Charles Wood |
| 1852 | Benjamin Disraeli |
| 1852-1855 | William Gladstone |
| 1855-1858 | George Lewis |
| 1858-1859 | Benjamin Disraeli |
| 1859-1866 | William Gladstone |
| 1866-1868 | Benjamin Disraeli |
| 1868 | George Hunt |
| 1868-1873 | Robert Lowe |
| 1873-1874 | William Gladstone |
| 1874-1880 | Stafford Northcote |
| 1880-1882 | William Gladstone |
| 1882-1885 | Hugh Childers |
| 1885-1886 | Michael Hicks-Beach |
| 1886 | William Harcourt |
| 1886-1887 | Randolph Churchill |
| 1887-1892 | George Goschen |
| 1892-1895 | William Harcourt |
| 1895-1902 | Michael Hicks-Beach |
| 1902-1903 | Charles Ritchie |
| 1903-1905 | Austen Chamberlain |
| 1908-1915 | David Lloyd George |
| 1915-1916 | Reginald McKenna |
| 1916-1919 | Bonar Law |
| 1919-1921 | Austen Chamberlain |
| 1921-1922 | Robert Horne |
| 1922-1923 | Stanley Baldwin |
| 1923-1924 | Neville Chamberlain |
| 1924 | Philip Snowden |
| 1924-1929 | Winston Churchill |
| 1929-1931 | Philip Snowden |
| 1931-1937 | Neville Chamberlain |
| 1937-1940 | John Simon |
| 1940-1943 | Kingsley Wood |
| 1943-1945 | John Anderson |
| 1945-1947 | Hugh Dalton |
| 1947-1950 | Stafford Cripps |
| 1950-1951 | Hugh Gaitskell |
| 1951-1955 | Rab Butler |
| 1955-1957 | Harold Macmillan |
| 1957-1958 | Peter Thorneycroft |
| 1958-1960 | Derrick Heathcoat-Amory |
| 1960-1962 | John Selwyn Lloyd |
| 1962-1964 | Reginald Maudling |
| 1964-1967 | James Callaghan |
| 1967-1970 | Roy Jenkins |
| 1970 | Ian Macleod |
| 1970-1974 | Anthony Barber |
| 1974-1979 | Dennis Healey |
| 1979-1983 | Geoffrey Howe |
| 1983-1989 | Nigel Lawson |
| 1989-1990 | John Major |
| 1990-1993 | Norman Lamont |
| 1993-1997 | Kenneth Clarke |
| 1997 onwards | Gordon Brown |
Did you know...
You may be interested in the following tax facts.
A temporary tax?
Income tax is still to this day, a temporary tax. It expires on 5 April of each year and Parliament has to reapply it by the annual Finance Act. For up to four months until the Finance Act becomes law again, the Provisional Collection of Taxes Act (1913) ensures that taxes can still be collected.
Taxation - a big business
The Inland Revenue produces more than 12.5 million leaflets a year making up 160 titles. Nine million people are affected by self assessment. The Inland Revenue employs more than 50,000 people but many times that number work in the industry, e.g. tax advisers, accountants, solicitors, etc.
Today's taxes
Many people focus on what the top rate of tax is. Whatever income tax you pay, consider that - out of your already taxed income - you are paying additional tax on tobacco, fuel, alcohol, cars (road fund and VAT), VAT (payable on most items that you buy ... including many of the items already listed!)
Despite all this, you might be surprised to read that the UK has one of the lowest overall tax rates in Europe.
This page was last reviewed on 03 April 2006. The information may not reflect changes in legislation made after this date.
This is only a guide to your tax position and should not be relied on in place of professional accounting or tax advice. Any calculated figures are illustrative and are based on the data you provided.
