9 January 1799: income tax introduced to Britain

In the 1790s, with Britain at war with Napoleon, the country urgently needed cash. And so on this day in 1799, a 10% levy was raised on all income over £60.

In the late 1790s, the war against Napoleon was not going well for Britain. An invasion from across the Channel was expected at any moment, and the French army was better organised than Britain's. To top it all off, Britain's public finances were in a mess.

Prime Minister William Pitt the Younger urgently needed an injection of cash. Taxes on spending (equivalent to modern-day VAT) and property were both considered and rejected, before Pitt settled on an income tax. It would apply to the whole of Great Britain, but not Ireland and it would be temporary.

Advertisement - Article continues below

Under the terms of the Act of 1799, a 10% levy was to be raised on all income over £60, with reductions applying on incomes of up to £200. Children could expect to pay up to 5% less on their earnings. Payments were to be made in six equal instalments from June that year.

Pitt estimated the country's total taxable income at around £100m. So, with a rate of 10%, he hoped to raise in the region of £10m. It soon dawned on him that this figure was overly optimistic and he revised his figure down to £7.5m. Yet, he was still to be disappointed. Only around £6m was raised, despite the appointment of tax inspectors, or "general commissioners".

Needless to say, the tax was far from popular with voters. And when a peace treaty was signed in 1802, the government, now led by Henry Addington, dispensed with the levy. But peace did not last long, and the income tax returned with the war in 1803.




How long can the good times roll?

Despite all the doom and gloom that has dominated our headlines for most of 2019, Britain and most of the rest of the developing world is currently en…
19 Dec 2019

What are the best ways of raising more money in tax?

Given that whoever wins next week's election will be going on a massive spending spree, we're going to need to raise at least some of that money throu…
5 Dec 2019
Investment strategy

What are the biggest mistakes investors make when it comes to tax?

The tax implications of an investment are something we rarely consider until after the event. That could prove to be an expensive mistake, says Domini…
27 Nov 2019

How tax has shaped the course of human history

Taxation is as old as civilisation itself. But how much is too much? Dominic Frisby looks at how taxation, war and society have evolved together over …
16 Oct 2019

Most Popular


These seven charts show exactly why you must own gold today

Covid-19 is accelerating many trends that were already in existence. The rising gold price is one such trend. These seven charts, says Dominic Frisby,…
3 Jun 2020

Disease, rioting and mass unemployment – so why are markets soaring?

Despite some pretty strong headwinds in the last year, America’s S&P 500 stock index is close to all-time highs. John Stepek explains why markets seem…
4 Jun 2020
EU Economy

Why a stronger euro is good news for investors

The fragile state of the eurozone has for a long time brought the threat of deflation. But the ECB’s latest moves have dampened those fears. John Step…
5 Jun 2020