See Tolkien's take on his interpretation of his works at the beginning of the Silmarillion 2nd edition. He wanted a legend for Britain that was tied to the land, not just the language, which is based on a combination of all the old cultures mentioned the the above posts, so Britain's history was no doubt of great inspiration to him.
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Tolkien was influenced in a large way by Beowulf, a Nordic story.
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The textbook for my Medieval Icelandic Language and Literature paper was proof read and pre-edited by The Man himself. He envisioned the end of the world and the final battle as a kind of Icelandic Ragnarok event, a very important idea in the Sil.