20th century History of taxation in the United Kingdom

1 20th century

1.1 first world war
1.2 purchase tax
1.3 income tax

20th century
first world war

the war (1914–1918) financed borrowing large sums @ home , abroad, new taxes, , inflation. implicitly financed postponing maintenance , repair, , canceling unneeded projects. government avoided indirect taxes because raised cost of living, , caused discontent among working class. there strong emphasis on being “fair” , being “scientific.” public supported heavy new taxes, minimal complaints. treasury rejected proposals stiff capital levy, labour party wanted use weaken capitalists. instead, there excess profits tax, of 50 percent of profits above normal prewar level; rate raised 80 percent in 1917. excise taxes added on luxury imports such automobiles, clocks , watches. there no sales tax or value added tax. main increase in revenue came income tax, in 1915 went 3s. 6d in pound (17.5%), , individual exemptions lowered. income tax rate grew 5s (25%) in 1916, , 6s (30%) in 1918. altogether, taxes, provided @ 30 percent of national expenditures, rest borrowing. national debt soared £625 million £7,800 million. government bonds typically paid 5 percent. inflation escalated pound in 1919 purchased third of basket had purchased 1914. wages laggard, , poor , retired hard hit.

purchase tax

between october 1940 , 1973 uk had consumption tax called purchase tax, levied @ different rates depending on goods luxuriousness. purchase tax applied wholesale price, @ rate of 33⅓ %. doubled in april 1942 66⅔ %, , further increased in april 1943 rate of 100%, before reverting in april 1946 33⅓ % again. unlike vat, purchase tax applied @ point of manufacture , distribution, not @ point of sale. rate of purchase tax @ start of 1973, when gave way vat, 25%. on 1 january 1973 uk joined european economic community , consequence purchase tax replaced value added tax on 1 april 1973. conservative chancellor lord barber set single vat rate (10%) on goods , services.

income tax

uk income tax has changed on years. taxed person s income regardless of beneficially entitled (that is, regardless of whether had legal obligation pass on person) income, person owes tax on income or beneficially entitled. companies taken out of income tax net in 1965 when corporation tax introduced. these changes consolidated income , corporation taxes act 1970. schedules under tax levied have changed. schedule b abolished in 1988, schedule c in 1996 , schedule e in 2003. income tax purposes, remaining schedules superseded income tax (trading , other income) act 2005, repealed schedule f completely. schedular system , schedules , d still remain in force corporation tax. highest rate of income tax peaked in second world war @ 99.25%. reduced , around 90% through 1950s , 60s.

tax revenues percentage of gdp u.k. in comparison oecd , eu 15.

in 1971 top rate of income tax on earned income cut 75%. surcharge of 15% kept top rate on investment income @ 90%. in 1974 cut partly reversed , top rate on earned income raised 83%. investment income surcharge raised top rate on investment income 98%, highest permanent rate since war. applied incomes on £20,000 (£191,279 of 2016),. in 1974 750,000 people liable pay top-rate of income tax.

margaret thatcher, favoured indirect taxation, reduced personal income tax rates during 1980s. in first budget after election victory in 1979, top rate reduced 83% 60% , basic rate 33% 30%. basic rate cut 3 successive budgets – 29% in 1986 budget, 27% in 1987 , 25% in 1988. top rate of income tax cut 40% in 1988 budget. investment income surcharge abolished in 1985.

under government of john major basic rate reduced in stages 23% 1997.