Tax

Question 1

Direct tax

Answer 1

Paid directly by an individual or organisation. The tax liability cannot be passed on to someone else.

Question 2

Indirect tax

Answer 2

Tax on goods and services

Question 3

Favour of using indirect taxes over direct taxes

Answer 3

Can reduce market failure
Don’t disincentivise work
Can be changed more easily

Question 4

Direc tax over indirect tax

Answer 4

Inflationary(indirect tax)
More progressive while indirect tax are more regressive
Indirect tax may lead to a black market

Question 5

Income tax

Answer 5

Levied on the interest on saving, profits from unincorporated firms, rent on property and on pensions

Question 6

Income 0 - £12,570

Answer 6

Personal Allowance
Tax free

Question 7

Income £12,571 - £50,270

Answer 7

Basic Rate
20%

Question 8

Income £50,271 - £125,140

Answer 8

Higher rate
40%

Question 9

Income £125,140

Answer 9

Additional Rate
45%

Question 10

National Insurance

Answer 10

Similar to income tax. Both based on income and collected via PAYE.
Used to fund pensions and some benefit such as maternity allowance and JSA

Question 11

Laffer curve

Answer 11

Increasing the rate of a direct tax will initially cause a rise in tax revenue before the tax revenue peaks at a certain amount.

Question 12

Corporation tax

Answer 12

25% for all businesses earning annual profits in excess of £250,000.
Firms can make deduction from their tax bill for investment in machinery, equipment and vehicles.

Question 13

Vat

Answer 13

Value added tax applies to most goods and services. Standard rate of 20%

Question 14

Council tax

Answer 14

Every domestic property is given a valuation based on what the property is believed to be worth and placed in a band.
One person household are entitled to 25% discount

Question 15

Business rates

Answer 15

Charged to commerical premises based on their rental valuation.