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History of Taxation in the UK

  • May 26, 2018
  • Issac Qureshi
  • Issac Qureshi, Taxation
Issac Qureshi History of Taxation in the UK

In the UK, paying taxes is a mandatory requirement for every citizen. The practice of imposing taxes on citizens dates back to the medieval times during when monarchs imposed levies on citizens on property and land. The revenue raised was used to run various functions of the government such as paying salaries of servants and the army.

The earliest recorded period in which taxation was practiced in the UK was in 1203 when a tax was imposed on products such as wool and wine. Towards 1572, the Poor Law tax was launched, and money was collected from locals for government and charity aid supplied to them. In 1692, the implementation of the land tax implied that people could pay taxes for properties, both in the rural and urban areas. Taxation was imposed by rich local commissioners who worked on a volunteer basis. However, income tax was not imposed until in 1799 when a 10% tax rate was imposed on anyone who earned over 200 pounds annually.

In the 19th century, an emphasis was laid on free trade to help encourage economic growth in the country. This was achieved following a campaign by Prime Minister, Sir Robert Peel, but was repelled in 1842 to collect funds for the Crimean war.

Changes were however introduced by Lloyd George in 1909 to obtain funds for national social welfare for the aged and pension for retired workers. Among the levies that were introduced included a super tax for persons who earned over 5,000 pounds.

The First World War in 1914 changed everything regarding taxation policies. The government taxed all luxury goods namely sugar, tea, tobacco, and beer among others. The funds went into facilitating the operations of the World War. Despite the high tax rates, the government overspent and led to a gross national debt of over 7.8 billion pounds by the end of the war.

By 1944, the government was seeking to enrich its military, leading to the introduction of the PAYE and the VAT system to facilitate the collection of taxes. It also increased the number of people paying taxes to 12 million.

After the war, the national taxation system was rearranged with the major changes including the introduction of the Corporation Tax for companies and businesses. Margaret Thatcher’s tax policy in 1979 saw the basic tax rate decreased to 20% to accommodate the low-income earners in the society.

Over the years, the government adjusted its taxation policies per its national budgetary demands to funds its operations and expansions.