Income tax abolished and reintroduced

Following the end of the Napoleonic War in 1815, the public mood of compliance with income tax rapidly evaporated.

The government wanted to retain it to help reduce the National Debt, which by now had swelled to over £700 million. However, strong public opposition to the tax was demonstrated by landowners, merchants, manufacturers, bankers, and tradesmen.

It was denounced as 'repugnant' at a large public meeting at Manchester, and almost 400 petitions against it were presented to the House of Commons. Finally, on 18 March 1816, the government was narrowly defeated on the issue and was forced to abandon it.

The impact of free trade

By the early 1840s business opinion had moved considerably towards 'free trade' and the removal of high protective duties on imports and exports. Sir Robert Peel, the Prime Minister, was keen to facilitate this thinking. In 1842, therefore, he re-introduced income tax at 7d in the pound on incomes over £150. This allowed him to remove import and export duties on more than 700 items.

The reimposition of the tax - this time as a peacetime measure - was only meant to be temporary. But the increasing cost of government commitments, pushed up by the Crimean War of 1853-56, made this an increasingly remote prospect. Income tax has remained ever since.

Budget day

The annual Budget statements made in Parliament by Chancellors of the Exchequer had begun in the mid-18th century. But it was Gladstone who turned them into a highpoint of the parliamentary year as an occasion on which to take stock of the nations's finances as a whole and consider issues relating to taxation. Then, as now, the Budgets were followed up with the annual Finance Acts.

Public trust on matters of taxation was considerably reinforced during Victorian times through Parliament's concern to ensure that the revenue collected from taxes was used responsibly. The year 1861 saw the establishment of the Public Accounts Committee which has played a central part, ever since, in ensuring that public money is spent in accordance with Parliament's wishes.


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Robert Peel
William Gladstone

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Did you know?

The earliest recorded Budget Days took place in the 1750s

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