As the self-assessment deadline looms there is no better time to delve into the history and byways of tax in the UK, starting at the beginning.
1. One of the first taxes to be levied in Britain was in effect protection money. This was Danegeld, which translates as Danish tax or tribute and was paid to Viking raiders to stop them destroying settlements. The tax dates from the ninth century and was given the name Danegeld by the Normans in the 11th century.
2. Lady Godiva, the wife of the Earl of Mercia, rode through 11th-century Coventry naked in opposition to the exorbitant horse tax levied on locals by her husband. While she was a real person, the ride, during which her body was partly covered by her long hair, is probably a legend. We have gained the phrase ‘Peeping Tom’ from it due to a tailor named Thomas, the sole person to have a peek at her – townsfolk had been ordered to ‘shutt their dore, and clap their windowes downe’. He was later blinded, either by divine retribution or angry locals, depending on the legend.
3. Some odd things tax has been levied on in England. Playing cards until 1960; fireplaces until 1689; windows in houses until 1851; bricks until 1850; hats until 1811, candles until 1831.
4. Not so noble knights in medieval times could dodge fighting in wars by paying ‘scutage’. This became known as the ‘cowardice tax’ and is seen as one of the reasons King John was forced to sign the Magna Carta in 1215, which among other things limited payments to the Crown.
5. The seemingly random start date to the tax year of 6 April is because of the switch in 1753 from the Julian calendar to the Gregorian one. The 1752-53 tax year was stretched from its former end date of 24 March. Most people did not have to pay more tax that year as most taxes were levied annually.
6. The UK government’s tax take, as a share of national income, is now more than at any time since the 1940s. But individual income tax rates were far higher in the 20th century. Here are some sample top rates of income tax: during the second world war it peaked at 99.25%; in the 1950s and 1960s it was 90%; by 1979 it was 83% with a 15% surcharge for investment income, which the new administration of Margaret Thatcher cut to 60% in 1979. In 1988 her chancellor, Nigel Lawson, cut the top rate to 40%. It is currently 45%.
7. Supertaxes and surcharges were also applied from time to time, which prompted The Beatles to release Taxman in 1965, which alluded to the fact that at their highest tax rate they kept only a shilling in every pound they made, that is, were paying 95% tax.
8. The top 1% of UK taxpayers pay more than a quarter of income tax and the top 50% of taxpayers pay 90% of income tax.
9. The UK tax code is one of the longest documents in the world at more than 10 million words.
10. Income tax, as we understand it, dates from 1798. It was introduced by William Pitt the Younger to pay for preparations for the Napoleonic wars. It was levied at 2p in the pound (until decimalisation in 1971 there were 240 pence in a pound) and was abolished in 1802. Income tax came and went during the first half of the 19th century. Unsurprisingly it was not popular – many people felt having to state their income to the government was an invasion of their privacy. As late as 1874 The Times wrote that whichever party took power income tax would be abolished. As it happened Benjamin Disraeli won the general election but did not dispense with the tax. This was the last time abolishing income tax was a serious possibility in the UK.
11. It might seem as if VAT (value added tax) has been around for ever but in fact it dates from April 1973. It was introduced as a consequence of the UK joining what was then the European Economic Community. Most goods and services were rated at 10%.
12. Before VAT there was purchase tax, which was introduced in October 1940. It was levied on wholesale prices and the rate varied depending on the goods sold, it was higher for more luxurious items. By 1943 it had reached 100% at its highest rate. By 1973 it had fallen to 25%.
13. From 1965 companies have paid corporation tax rather than income tax, which was 40% at introduction. The rate is currently 25% or 19% for companies whose profits do not exceed £50,000 a year.
14. Cigarettes are the most highly taxed item in the UK. Per packet the duty is £6.33 after a 66p rise in the November 2023 budget, with VAT of 20% adding approximate £2 to each packet. Thus the actual cigarettes only cost about £2 a packet, and the tax rate in effect is just under 80%.
15. On wine, duty of £2.67 a bottle is levied plus 20% VAT. This means for a £10 bottle of wine nearly half the cost is tax. A 40% strength bottle of spirits will attract excise duty of £8.85 plus of course VAT. So for a £20 bottle of gin the tax will be nearly £13.
16. Food and drink bought in the shops are usually VAT free, except for alcohol, sweets, crisps, savoury snacks, sports drinks, soft drinks and mineral water.
17. VAT is paid on hot takeaway food and food deliveries but not cold takeaways (excluding ice cream) unless they are to be eaten in a designated area.
18. Some things that are VAT free: plants and seeds; gambling, bingo and lotteries, going to the gym; admissions to cultural events; charity shop sales; incontinence and sanitary protection pads, aids for people with disabilities; books, magazines and newspapers; children’s clothes.
19. In March No 10 published some details about the prime minister’s tax affairs. Over the previous three years Rishi Sunak paid about £1m of UK tax and $51,648 in tax to the US government thought to relate to dividends on investments.
20. In the 2022-23 tax year the UK government’s tax receipts amounted to £786.6 million.
HMRC’s view
What does the taxman himself have to say about his – if no one else’s – favourite subject?
- Some ridiculous excuses for not filing on time: I have been on my yacht; my mother-in-law, who is a witch, put a curse on me; my hamster ate my post; my dog ate my post; I couldn’t get an internet signal because I was up a mountain;
- Online self assessment dates from 2000. The first year 38,000 people did their tax return digitally by the 31 January 2001 deadline;
- Nearly 100,000 people filed their tax return on the first day of the new tax year in 2020, 6 April;
- In 2020, the 31 January deadline, as other years, was the busiest day to file a tax return;
- The busiest time to file was 4pm to 5pm.
And don’t forget, your self assessment and payment must be with HMRC by 31 January. If you haven’t done one before or think you may not be claiming all the allowances you are entitled to – or have simply run out of time, the accountants at Finsbury Robinson will be happy to help!
