Tax/Laffer Curve Flashcards
What is the UK corporation tax rate 2025
25%
What is the UK income tax rates 2025
(I only expect you to get the personal allowance and the percentages right)
Personal Allowance: £0 to £12,570 – 0% tax rate.
Basic Rate: £12,571 to £50,270 – 20% tax rate.
Higher Rate: £50,271 to £125,140 – 40% tax rate.
Additional Rate: Over £125,140 – 45% tax rate.
Examples of when a decrease in the tax rate leads to increased tax revenue
Reduction in corporation tax rate from 28% to 20%
Reduction in the 50% tax rate for those earning above £150,000 to 45%
When did a reduction in the tax rate lead to an increase in tax revenue
And explain why (hint:elasticity)
Under the coalition govt, the chancellor of the Exchequer, George Osbourne, reduced the highest rate of income tax from 50% to 45% in the 2013/14 tax year
As a result, income tax revenue from the highest earners actually rose that year
Yes, the increase in tax revenue was partly due to the higher elasticity of taxable income among high earners. Higher-income individuals tend to have more flexibility in their income sources and are more likely to respond to changes in tax rates by altering their behavior. This could involve:
Shifting income into tax-efficient savings or investments.
Reducing the amount of taxable income they report (e.g., by using tax avoidance strategies).
Moving income to lower-tax jurisdictions.
