UK Taxation 2025 - 2026 Summary

Question 1

How much tax revenue does income tax make ?

Answer 1

25 % of govement revenue

Question 2

Income tax

Answer 2

Effects level of consumption , disposable income , AD

Incentive towards work, size of labour force , LRAS

Question 3

National insurance

Answer 3

Class 1 contribution at 8% on £12,570 and £50,270 per year 2% on everything over £50,270

Employers pay up to 15 % ok over £5000 as well as collecting employee contributions on behalf of H.M.R.C

Class 1 contributions were reduced from 12% to 10% in January 2024

And from 10% to 8% in 2024

Self employed pay 9% £12,570 - £50,270

2% on 50,270 above plus 3.45 per weel

Question 4

NI analysis

Answer 4

Employee contribution , disposable income (AD)

Employer contribution , fall in employment , cut wage , cut non pecuniary benefits

C.o.p / cost of worker

Question 5

VAT

Answer 5

Indirect tax effects c.o.p shifts SRAS

20 % standard rate

5% on lower rate or energy (to reduce negative externality) and on aids to give up smoking

Items exempt on zero - rated such as children’s clothing and basic food stuff

Question 7

Coroporation tax

Answer 7

April 2017 cuts from 20% to 19%

April’s 2023 increased from 19% to 25%

Does not change C.O.P

Tax on retained profit impacts ability to invest into capital and stock

Increasing AD and shifting LRAS

Question 8

Stamp duty land tax

Answer 8

On purchache of residential properties

Incentives home ownership

Renters have less disposable income

Question 9

Inheritance tax

Answer 9

40% on everything over 325 000

Question 10

Capital gains tax

Answer 10

Paid on assets e.g second homes

Varies from 10% - 28%

Depending on other taxes paid