Introduction to Taxation Flashcards
What does the UK tax system encourage?
- Individual saving habits
- Charitable donations
- Entrepreneurs and investors
What does the UK tax system discourage?
- Motoring
- Smoking
- Drinking
Define direct taxes
Paid by those who generate funds
Define indirect taxes
Relate to consumption
Define progressive taxes
Increase with income
Define regressive taxes
Decrease with income
Define unit taxes
Calculated as a flat rate per item
Define value taxes
Added to the percentage value of goods or services
Define income tax
Payable by individuals on their earnings
Define capital taxes
Paid on the disposal of capital assets
Define expenditure taxes
Paid by those who incur expenditure
Define ability to pay principle
Tax should be based on ability to pay
Define benefit principle
Tax should be based on the benefit that the taxpayer receives
Define neutrality principle
Tax should not distort choice
Define equity principle
Tax should be fair and just
Define efficiency principle
The cost of collection should be less than the tax raised
Who pays income tax?
All individuals who are either employed or self-employed
How is income tax collected from the employed?
PAYE
Who pays National Insurance Contributions (NICs)?
- All individuals who are either employed or self-employed
2. Businesses in relation to their employees
Who pays Capital Gains Tax (CGT)?
Payable by individuals on the disposal of capital assets
Who pays corporation tax?
Payable by companies on all their income and gains
Who pays Value Added Tax (VAT)?
Payable by the final consumer on most goods and services
When does the tax year run from and to?
6 April to following 5 April
When does the financial year run from and to?
1 April to 31 March