super tax

Super tax (aka Surtax)

Super tax, or surtax was introduced in 1909 by the then Prime Minister, David Lloyd George. Representing marginal rates of taxation for very high earners, super tax was so named because the taxation rate was incredibly punitive.

As an example, after the second World War the highest surtax rate was 19s 6d in the British Pound, or 97.5%⁽¹⁾. You only saw two and a half percent, i.e. the remaining 6d, of those earnings above the highest allowance at that point!

Though National Insurance contributions⁽²⁾ were capped, in order to not let that remaining 2.5% tend towards nothing, the system ultimately fell foul of the increasingly monied segments of society, and tasting slightly of the high rates of war taxation was abolished in 1971, whereupon it was replaced by higher rates of income tax for those with high incomes.

Super tax is now but a memory, save for when one is playing Monopoly!

Some juicy extra details regarding Income Tax:

• It was introduced by the then Chancellor of the Exchequer, William Pitt in 1799-1801 to finance the wars with revolutionary France;
• Reintroduced for the same purpose in 1803-16 it was then abolished;
• Income Tax became levied in perpetuity in 1842 by Pitt, and has remained with us ever since.
• The lowest ever rate of Income Tax was 0.83% in 1874-76.
• The highest rate was 50% in 1941-46.
• Current (2002/03) rates, excluding tax credits, are as follows:
  • 10% for income £1,920 over one's personal allowance (generally £4,615 per annum)
  • 22% ("Basic Rate") for the £1,921 to £29,900 over that
  • 40% ("Higher Rate") for anything over that £29,900

Notes:

1. This pre-decimalisation. There were 19 shillings in the pound, and twelve pence to the shilling. Therefore, 19s 6d, is 19/20 (or 95%) plus 6/240 (or 2.5%).
2. National Insurance (Contributions) [NICs] are weekly contributions paid by both employers and employees, introduced in the 1911 National Insurance Act (also Lloyd George). Representing somewhere around 1.6%-7% of an employee's gross pay, it contributes towards contributory state welfare benefits and the State Retirement Pension (SERPS). Employers make contributions in respect of employees also, and those contributing to occupational pensions and other persons can make reduced contributions.

• United Kingdom Parliament Hansard, 15 Mar 1999 : Column 772
• HM Inspector of Taxes, and
  personal knowledge as a Payroll Assistant at the Scottish Prison Service
• The Macmillan Encyclopaedia, 1981 ed.
• The Hutchinson Softback Enyclopaedia, 3rd ed., 1996