Death Duties Introduced for the First Time in Britain

Modern inheritance tax dates back to 1894 when the government introduced estate duty, a tax on the capital value of land, in a bid to raise money to pay off a £4m government deficit.

Unfair Tax

The succession duty’s taxation of the life interest in real property, as opposed to its full capital value, was seen to be unfair to heirs of different ages, as elder heirs effectively received a life interest that was lower in value than one received by a younger heir, even when they were shares in the same property.

William Harcourt

In his famous 1894 budget, William Harcourt further noted the unfairness of the system that had developed:

The whole system is admittedly difficult and complicated. The Death Duties have grown up piecemeal, and bear traces of their fragmentary origin. They have never been established upon any general principles, and they present an extraordinary specimen of tessellated legislation. Various measures have been made at different times to redress some of their inequalities. Here a patch and there a patch, but each successive modification has only left confusion worse compounded.

In the Finance Act 1894, estate duty replaced probate duty, account duty, certain additional succession duties, and the 1889 estate duty.

It was collected in addition to the legacy duty and succession duty which still remained in effect.