Whether it was taxes that were collected during a harvest of British land or money paid to fend off Viking raiders who would plunder and destroy small towns and villages, taxation has always been a part of life, even before the country was the fully-formed United Kingdom.
And from medieval land taxes to the development of a making tax digital software solution, it’s safe to say that over the centuries, moving with the times has always been met with more than a few eye rolls.
However, as the timeline below clearly shows us, the history of taxation in the United Kingdom has always been rather eventful. Below are just some of the most notable timeline moments in UK taxation history.
The Window Tax (1696)
Before it was abolished in 1851, homes could be taxed based on the number of windows their houses had. Due to the continued clipping of coinage (a process where small amounts of precious metals were removed from coins in order to save them up and melt them down into new coins), William III decide to recoup the losses by implementing this unusual tax.
To avoid incurring these taxes, a lot of houses bricked up their windows (many are still like this today). Incidentally, the tax was repealed on the advice of doctors, who deemed the lack of light to be unhealthy for residents.
Income Tax (1799)
The bane of many people’s existence, income tax rates were first introduced in the United Kingdom by William Pitt the Younger, the youngest Prime Minister in UK history. The much-maligned taxation was introduced in 1799 as a means to fund the French Revolutionary Wars after years of expenditures.
While it was abolished by Henry Addington in 1802, it was immediately introduced again in 1803, only to be abolished yet again in 1816 (post-battle of Waterloo). However, by the mid-1860s, it had once again been dusted off and implemented, this time staying around long enough to be deemed part and parcel of paying taxes.
The First World War (1914)
World War One was an expensive affair, and Britain alone incurred a staggering £3.251 billion in costs (a sum which we finally fully paid off in 2015!). So, how was this huge and long-lasting war initially funded and financed? You guessed it – inflation, new taxes (including a huge increase of 73% during the course of the war), and a lot of money borrowing.
Purchase Tax (1940)
A more unique method of taxation, Purchase Taxes were initially introduced during World War II. What made this tax unique? It was a tax that was enforced at the point of manufacture, instead of the sales point. The goal was to reduce the unnecessary wastage of key raw materials during the conflict. This form of taxation remained in the UK until the 1970s, at which point it was replaced by VAT.
Corporation Tax (1965)
Corporation Tax was implemented as a part of the United Kingdom’s Finance Act of 1965. The term Corporation Tax generally refers to the taxes taken on any profits that are made by any UK-based businesses and includes any company gains on assets registered abroad with legally permanent enterprises in the UK.
Before Corporation Tax was introduced, corporations were paying income tax in the exact same way as people were. This new system created an official separation between business and private individuals. The Finance Act of 1965 also implemented Capital Gains Tax, but this was eventually abolished.
Making Tax Digital (2019)
So, what’s the next phase of innovation when it comes to implementing taxation? The UK government implemented stage one of its plan to help private individuals and businesses of all sizes to keep on top of their tax records in April 2019.
This ‘Making Tax Digital’ (or MTD) initiative is a scheme by HMRC that’s designed to digitalise the United Kingdom’s tax information. The end goal is to make your VAT, Income Tax Assessments, and Corporation Taxes simpler, more fluid, and far more efficient for individuals and government officials alike.
If you’re currently still relying on a paper-only approach, or using computer spreadsheets to maintain your information, now is the time to educate yourself on which software HMRC approves of to make this transition easier.
Over the course of the next few years, this digitisation will continue to grow and improve, as it streamlines the entire process for the benefit of all parties involved.
The Future of Taxation in the UK
It’s understandable to consider what’s going to happen beyond the next few years when it comes to VAT taxes, Corporation Taxes, and anything else in between. In recent years, the world has experienced some very unexpected changes, for individuals and businesses alike.
However, the digitisation of taxes has given us all a direction, and a little more clarity in terms of what we can expect in the near future.
If nothing else, COVID has provided businesses and governments with a chance to address past problems and prepare for unforeseen future issues. When you combine this with the exciting advancements in Artificial Intelligence and improved clarity in online tax matters, the UK can continue to push forward, and benefit from a simplified, less difficult-to-understand system.
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