Motoring Taxes
The McKenna Duties
In the September 1915 budget Reginald McKenna, Herbert Asquith's Chancellor of the Exchequer in the wartime coalition government, introduced a 33 and one-third levy on luxury imports to help pay for the war. Commercial vehicles were excluded, as they were needed for the war effort.
This became known as the "McKenna Duties" and was intended as a temporary measure, but lasted until 1956. Briefly removed from August 1924 to June 1925 and then extended on 1st May 1926 to include Commercials.
McKenna later became chairman of the Midland Bank. He died aged 80 in 1943.
The Horsepower Tax
Mass produced American cars were popular in the UK due to their low purchase cost. In 1921 the so-called "horsepower tax" was introduced based on the 1906 Royal Automobile Club (RAC) formula. The annual tax was £1 per horsepower.
The calculation was partly based on the bore of an engine and thus caused American cars to be badly affected. A Ford Model T at 22.5hp paid £23 instead of the previous Road Fund Licence of £6 6s, whereas a Morris Cowley at 11.9hp paid just £12.
This Tax continued until 1947 when it was replaced by a flat rate system. The narrow bore/long stroke engines it had encouraged now went out of fashion.
RAC HP Rating
The RAC rating was used for taxation purposes up to the early 1960's.
The calculation used is:
HP = ( "Diameter of Cylinder in inches" X "Number of Cylinders" ) / 2.5
A manufacturer would often include both the RAC rate and the actual output in a model name such as 16/65. This represents a RAC rating of 16 HP on a vehicle with an actual output of 65 BHP.
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