On the 9th January 1799, modern income tax was introduced for the first time. William Pitt the Younger, the British Prime Minister, announced the tax the previous December as a way to pay for the wars against France. It stayed in force until 1802, at which point the Peace of Amiens secured a temporary break from hostilities, but was reintroduced in 1803 after the war recommenced.
Britain became involved in the French Revolutionary Wars after France declared war in 1792, and by 1799 almost continuous conflict had seriously weakened her finances. For much of this time the French had been better organised than the forces of the First and Second Coalitions, and Britain had found itself needing to offer financial support to other coalition members in order to maintain the size of force necessary to take on the French military machine.
However, this financial commitment had begun to run up a huge national debt, and attempts to reduce the cost of the military had led to starvation in the army and a mutiny in the navy. Holding joint positions of Prime Minister and Chancellor of the Exchequer, Pitt the Younger introduced his graduated or progressive income tax as “aid and contribution for the prosecution of the war”. The tax rate gradually increased from less than 1% of incomes of £60 up to 10% of incomes of £200 and was intended to be a temporary measure to pay for the war.
Interestingly, war also led the US federal government to introduce its first income tax on the 5th August 1861, which helped to pay for the American Civil War.