Why Do We Pay Tax?

If you think your income is lower than it should, you’re not alone. Over the years, taxes have been used to fuel wars, topple kings, and fund empires. And now, the UK faces yet another tax shake-up.

Rachel Reeves, the Chancellor of the Exchequer (the government’s chief financial minister), may have to raise income tax thresholds to compensate for weak economic growth. In December, the economy grew slightly, but over the last three months, it barely scraped 0.1%, narrowly avoiding a recession. Businesses are investing less, people are spending cautiously, and government spending is rising. With financial pressures mounting, Reeves faces the same dilemma that has haunted leaders for centuries: how to fund a nation without fuelling public backlash.

Taxation has always been an unavoidable necessity—sometimes a tool of stability, sometimes the spark of revolution. But beyond politics and economics, taxation is something every individual feels on a personal level. From the moment we enter the workforce, a portion of our earnings is taken from us, before we even see it.

But when did we agree to this and how did taxation become an integral part of life?

To understand how we got here, we need to look at the past.

The struggle over taxation and government control stretches back centuries. In Tudor England (1485-1603), taxation was controlled by Parliament and granted only when necessary—usually to fund military campaigns. Before direct taxation, the system known as “fifteenths and tenths” required towns and boroughs to pay a fixed sum to the Crown. But this barely covered royal expenses, and Henry VIII’s ambitions demanded more. 

That all changed in 1513, when Cardinal Wolsey (Henry VIII’s chief minister) introduced the subsidy, a more progressive approach that taxed people based on their wages, income, and land. For the first time, your individual earnings determined your tax bill. It was a radical shift, laying the foundation for modern taxation—but people quickly found ways to avoid paying, and conflict between the Crown and Parliament escalated.

By the 17th century, taxation was no longer just about money—it was about power. Charles I, believing in royal prerogative—the idea that the king could govern without parliamentary approval—tried to raise money without Parliament’s consent. In 1626, he imposed a Forced Loan, demanding payments from landowners. Those who refused were imprisoned.

Parliament fought back. In 1628, they passed the Petition of Right, condemning non-parliamentary taxation and arbitrary imprisonment. Charles agreed—on paper. In reality, he ruled without Parliament for the next eleven years of tyranny. By 1642, tensions boiled over into the English Civil War, culminating in his execution in 1649.

For a brief time, England experimented with being a republic under Oliver Cromwell. But by 1660, the monarchy was restored under Charles II, (Charles I’s son) and the debate over taxation continued. 

In 1688, James II, the brother of Charles II, was overthrown in the Glorious Revolution for trying to restore absolute monarchy and strengthen Catholic influence. Parliament invited William III and Mary II to take the throne, but under strict conditions imposed by the Bill of Rights 1689. Kings got to rule, but Parliament decided how.

By the end of the 17th century, new taxation methods emerged to avoid the unpopular idea of directly taxing income. In 1696, William III introduced the Window Tax, assuming that wealthier individuals had larger homes with more windows. The wealthy responded by bricking them up.

Then came the Stamp Act of 1712, taxing newspapers and limiting access to information. The pattern repeated—whenever a new tax was introduced, the public resisted, and governments adapted.

In 1799, the first income tax was introduced to fund the war against Napoleon. The tax applied to individuals earning over £60 per year, with a graduated rate ranging from 1% to 10%. Those earning over £200 were taxed at the maximum 10% rate. At first, many considered paying it a patriotic duty. However, after the Napoleonic Wars ended in 1815, public support for income tax quickly disappeared, leading to growing resistance against it.

By the 1840s, support for free trade was gaining momentum. Prime Minister Sir Robert Peel sought to promote this by reintroducing income tax. This allowed him to remove many import and export duties. Initially intended as a temporary measure, rising government expenses—especially due to the Crimean War (1853-56)—made its abolition unlikely. As a result, income tax has remained ever since.

By the 19th century, taxation had shifted from funding wars to shaping society. In 1909, David Lloyd George introduced the “People’s Budget,” taxing land and high incomes to fund social welfare programmes. The House of Lords refused to pass it, triggering a constitutional crisis. In response, Parliament stripped the Lords of their veto power under the Parliament Act 1911.

During World War II, taxation reached unprecedented levels—income tax hit a staggering 98% at its highest rate to fund the war effort. The introduction of PAYE (pay as you earn) in 1944 made taxation a seamless part of working life. From that moment, workers never saw their full wages again. Tax would be deducted before wages were received. This ensured a steady and predictable revenue stream for the government.  

But after the war, the debate shifted again. In 1979, Margaret Thatcher reshaped taxation, reducing income tax rates and shifting the burden toward consumption taxes like Value Added Tax. Later governments followed suit, cutting taxes to the lowest basic rate at 20%—until the 2008 financial crash. Austerity measures led to the introduction of a 50% additional tax rate on high earners. Today, this remains at 45%.

At its core, taxation is the price we pay for a functioning society. Without it, there would be no funding for public services like healthcare, education, infrastructure, or defence. As the digital economy grows, it’s hard to predict what form taxes will take. But centuries of history show that taxpayers only tolerate so much before pushing back.

 Every new tax reminds us that the books must also be balanced against public trust. From Henry VIII to today’s leaders, the story remains the same: push too hard, and risk losing the support of the people. Now, it’s Rachel Reeves’s turn to test that delicate line. We can only wait to see where she takes it.

One thing, however, is certain:

Death and taxes remain the only certainties in life.