The tax was introduced in England and Wales under the An Act for granting to His Majesty severall Rates or Duties upon Houses for making good the Deficiency of the clipped Money in 1696 under King William III and was designed to impose tax relative to the prosperity of the taxpayer, but without the controversy that then surrounded the idea of income tax.
At that time, many people in Britain opposed income tax, on principle, because they believed that the disclosure of personal income represented an unacceptable governmental intrusion into private matters, and a potential threat to personal liberty. In fact the first permanent British income tax was not introduced until 1842, and the issue remained intensely controversial well into the 20th century.
When the window tax was introduced, it consisted of two parts: a flat-rate house tax of 2 shillings per house (£11.75 as of 2013), and a variable tax for the number of windows above ten windows in the house. Properties with between ten and twenty windows paid a total of four shillings (£23.5 as of 2013), and those above twenty windows paid eight shillings(£47 as of 2013). The number of windows that incurred tax was changed to seven in 1766 and eight in 1825.
The flat-rate tax was changed to a variable rate, dependent on the property value, in 1778. People who were exempt from paying church or poor rates, for reasons of poverty, were exempt from the window tax. Window tax was relatively unintrusive and easy to assess. Certain rooms, particularly dairies, cheeserooms and milkhouses were exempt providing they were clearly labelled, and it is not uncommon to find the name of such rooms carved on the lintel. The bigger the house, the more windows it was likely to have, and the more tax the occupants would pay. Nevertheless, the tax was unpopular, because it was seen by some as a tax on "light and air".
There was a strong agitation in England in favour of the abolition of the tax during the winter of 1850–1851, and it was accordingly repealed on 24 July 1851, and a tax on inhabited houses substituted.