Income Tax was the first tax in British history to be levied directly on people’s earnings. It was introduced in 1799 by the then Prime Minister William Pitt the Younger, as a temporary measure to cover the cost of the Napoleonic Wars.
Today, it remains a temporary tax, which expires on April 5 each year, and has to be renewed as a provision in the annual Finance Bill. The Provisional Collection of Taxes Act 1913 permits the Government to continue to collect Income Tax for up to four months after the expiry of the measure, until the Finance Bill becomes law.
Deduction at source was introduced in 1803 by Henry Addington. At this time, the amount charged was reduced from the original rate of 10 per cent on incomes in excess of £60 per annum, but the earnings threshold was widened to double the size of the liable population.
Income Tax was formally repealed in 1816, a year after the Battle of Waterloo, but it was reintroduced in 1842 by Sir Robert Peel to deal with a massive public deficit. At this time, it was levied only on the very rich, and it remained so for many years. In 1874, it contributed only £6 million of Government revenues of £77 million. Well what do you know? We can blame Old Boney!