| Act of Parliament | |
 | |
| Long title | An Act to grant certain duties of Customs and Inland Revenue, to alter other duties, and to amend the Law relating to Customs and Inland Revenue (including Excise) and the National Debt, and to make other provisions for the financial arrangements of the year. |
|---|---|
| Citation | 1 & 2 Geo. 5 c. 48 |
| Dates | |
| Royal assent | 16 December 1911 |
| Text of statute as originally enacted | |
The Finance Act 1911 (1 & 2 Geo. 5 c. 48) was an act of the Parliament of the United Kingdom. [1]
The Finance Act 1911 was enacted following the constitutional crisis caused by the House of Lords’ rejection of the Liberal government’s 1909 Budget, commonly known as the People's Budget. The Budget, introduced by Chancellor of the Exchequer David Lloyd George, proposed higher income taxation and new duties to finance expanding social expenditure, and its rejection marked a significant departure from constitutional convention. [2]
The resulting political crisis led to two general elections in 1910, January and December, and culminated in the passage of the Parliament Act 1911, which restricted the House of Lords’ power to block legislation and removed their ability to veto money bills. [3]
The Finance Act 1911 formed part of this wider settlement by giving statutory effect to fiscal measures that had previously been delayed or contested, and by consolidating changes to income taxation within the evolving framework of early twentieth-century British public finance. [4]
The Finance Act 1911 increased the standard (basic) rate of income tax from nine pence in the pound (9d) to one shilling and two pence in the pound (1s 2d), while leaving the additional rate (supertax) on higher incomes unchanged. [1] Under the pre-decimal currency system, one pound sterling was divided into 240 pence, meaning that a rate of 9d represented 3.75 per cent of income, while 1s 2d (14d) represented approximately 5.83 per cent. [5] This standard rate of income tax would remained unchanged until 1916, when it was increased in response to the fiscal demands of the First World War. [6]
Although the standard rate of income tax in 1911 was one shilling and two pence in the pound (1s 2d), income tax was not payable on the first £160 of income. [7] Above this level, liability was reduced through a system of abatements, with the full standard rate applying only once abatements were exhausted. [7] As a result, income tax applied to a relatively small proportion of the population, and only a minority of taxpayers paid the full basic rate. [8] [9]
An additional duty (supertax) applied only to individuals with total incomes exceeding £5,000 per year, charged at six pence in the pound on the relevant portion of income. [10] The Finance Act 1911 did not alter the supertax threshold or rate, which remained governed by the provisions introduced in 1909–10. [10]
| Income band (1911) | Marginal rate | Notes |
|---|---|---|
| Up to £160 | 0% | Exempt from income tax [7] |
| Above £160 (subject to abatements) | 1s 2d in the £ (14d ≈ 5.83%) | Reduced liability until abatements exhausted [7] [8] |
| Total income above £5,000 | Additional duty (supertax) at 6d in the £ (≈2.5%) | Applied only above the supertax threshold [10] |
| Gross income | Exempt amount | Taxable after abatement | Basic tax payable | Cumulative tax payable | Notes |
|---|---|---|---|---|---|
| £150 | £150 | £0 | £0 | £0 | Below income tax threshold [7] |
| £200 | £160 | £40 | £2 6s 8d | £2 6s 8d | Abatement reduces liability [7] |
| £400 | £160 | £240 | £14 | £14 | Effective rate below statutory rate [7] [8] |
| £700 | £160 | £540 | £31 10s | £31 10s | Full basic rate applies [7] |
| £1,000 | £160 | £840 | £49 | £49 | No supertax liability [7] |
| £5,000 | £160 | £4,840 | £282 6s 8d | £282 6s 8d | Supertax threshold reached [10] |
| £10,000 | £160 | £9,840 | £573 | £698 | Supertax applies above £5,000 [10] |
Note: The examples above illustrate the effect of statutory exemptions and abatements under the income tax regime in force in 1911. Actual liability depended on income composition and reliefs, and the figures are illustrative rather than exhaustive. [7] [8]