Income tax By the 1860s, the progressive tax had become a grudgingly accepted element of the English fiscal system. The US federal government imposed the first personal income tax on August 5, 1861, to help pay for its war effort in the American Civil War - (3% of all incomes over US$800) (equivalent to $ in ). This tax was repealed and replaced by another income tax in 1862. It was only in 1894 that the first peacetime income tax was passed through the Wilson-Gorman tariff. The rate was 2% on income over $4000 (equivalent to $ in ), which meant fewer
Working Tax Credit significant levels of overpayments. In order to reduce the overpayment problem, the income disregard was raised tenfold from £2,500 to £25,000 with effect from 2006/07. Income for tax credit purposes is "in principle" assessed similarly to UK income tax. Thus 'income' (c/f 'taxable income') consists of what the individual receives from gross earned and unearned sources—less allowances for 'expenditures' that would reduce that income. But, unlike income tax, tax credits measure income based on family 'household', rather than the individuals within. Also the effect of "income disregard" —to mask large annual increases in resources from reassessment— weakens comparisons with a