Direct Tax vs Indirect Tax

Question 1

What is direct tax?

Answer 1

Taxes which are paid directly to the government. Based on income and profit

Question 2

Examples are direct tax?

Answer 2

Income tax
Corporation tax
Capital gains tax
Inheritance tax

Question 3

What is indirect tax?

Answer 3

Taxes are collected via an intermediary who passes it on to the government

Question 4

Examples of indirect tax?

Answer 4

When the consumer pays VAT to a supplier trader, and the trader then pays to the government

Question 5

A sole trader earns £100,000 profit in a year. What tax is paid?

Answer 5

Income tax and NIC

Question 6

A company has profit of £250,000 in a year and employs 30 employees. What tax is paid?

Answer 6

Corporation tax and NIC for employees

Question 7

An individual sells an antique table for £100,000 which cost £40,000 eight years ago. What tax is paid?

Answer 7

Capital gains tax

Question 8

A business buys raw materials from a supplier. What tax is paid?

Answer 8

VAT

Question 9

A company sells a factory for £750,000 bought for £250,000 three years ago

Answer 9

Corporation tax

Question 10

An individual dies and bequeaths his estate for £1,000,000 to his children

Answer 10

Inheritance tax