Taxation during the First World War

The burden of taxation before the First World War was still uneven and socially 'unfair'. Those on low wages, for instance £50 a year, were paying a higher percentage of their earnings (about 8 per cent) in tax than those on higher incomes of £200 (around 4 per cent).

Only with respect to incomes in excess of £10,000 a year did the proportion of tax reach a level of 8 per cent again. The burden supported by the poor was chiefly due to the heavy taxes which they still paid on basic items such as tea, sugar, tobacco and beer.

Wartime taxation

Any plans to try to equalise the way in which the tax burden was borne by taxpayers had to be set aside by the outbreak of war in 1914. Confident of the support of the British public, Parliament was able to authorize taxation to support unprecedented levels of wartime expenditure.

The standard rate of income tax, which was 6 per cent in 1914, stood at 30 per cent in 1918. There was also a substantial rise in the number of people paying income tax: in 1914 the figure was 1.13 million; by 1920 it had risen to 3 million, though in the early 1920s the number fell to around 2.2 million. By now some 60 per cent of tax revenue was from direct taxation, most of which came from income tax and super tax.

Recognising the central importance of income tax, Parliament took steps in 1918 to consolidate the accumulated mass of income tax legislation into a single Act of Parliament. But later attempts to simplify the administration of the tax proved difficult and were shelved in the 1930s.

Related information

Historic Hansard

Income Tax Bill 1918: debate in House of Lords

Glossary link