Today In History – January 9

William Pitt the Younger became prime minister in 1783. One of the first reforms he made was rationalizing the British tax system. His reforms were unpopular among tax bears. However, he helped increase the annual government revenue from £2.7 million in 1783 to £18.6 million in 1792.

In 1793, the British found themselves embroiled and yet another war, the Napoleonic wars. At this point, the government needed more money so that they could fund the war. In response, increases were made to indirect taxes, and a new tax, called the inheritance tax, was introduced. Unfortunately, any attempt that was made to raise money was unsuccessful. The government still needed to raise more revenue to support the war. Therefore, on January 9, 1799, Pitt introduced an income tax. Under the plan, all annual incomes over £200 were taxed at a rate of ten percent. Those who made between £60 and £200 were taxed at a graduated rate from under one percent to ten percent. Incomes below £60 a year were not taxed.

At first, many tried to evade the tax. However, over time it became widely accepted. This was mainly due to the realization that income tax helped England fight the Napoleonic War to victory.

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