Boo! What Income Tax's 215th birthday tells you about other new tax proposals

January 10, 2014 4:04 PM

Yesterday taxpayers commiserated the 215th anniversary Income Tax.

It was first introduced in 1799 to pay for the war against Napoleon at a starting rate of 2d per pound on earnings over £60 and 2s per pound on earnings over £200. In today's terminology and earnings, that's equivalent to 0.8 per cent (there were 240 old pennies per pound) on earnings over £65,000 and 10 per cent rate on earnings over £217,000.

Only a year after Waterloo, the hated tax was abolished ‘with a thundering peal of applause’ and Parliament ordered all records connected with it should be “collected, cut into pieces and pulped”.

But in 1842 Sir Robert Peel reintroduced it and it has since become the biggest contributor to government revenues. In 1874 it contributed just 8 per cent to Treasury coffers but today that number stands at around 44 per cent including National Insurance which is these days little more than just another type of income tax.

Technically it remains a temporary tax and is renewed by Parliament every year. So the next time you hear politicians telling you they want to introduce a small new tax which will be paid by the rich, remember that’s an incomplete sentence. What they actually mean is that it will be at low rates and paid by the rich at first, but then extended to everyone else at higher rates before long.

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