9 January 1799: income tax introduced to Britain

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.

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.