Fiscal / Supply side policy

HW Taxation Revenue (figures for 2021/22)

Total Receipts £ bn
Income tax
Value added tax
National insurance
Excise duties
Council taxes
Corporation tax
Business rates
Other taxes (environmental levies)
Other non-taxes (income received from public
corporations; interest payments on government
assets)

Data from March 2021 Budget

Taxation Revenue (figures for 2021/22)

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 Fiscal / Supply side policy

HW Government Spending (figures for 2021/22)

Total expenditure £ bn
Social Protection
Personal Social Services
Housing and Environment
Defence
Industry, agriculture, employment
Public Order and Safety
Health
Transport
Education
Debt Interest
Other
Total

Data from March 2021 Budget

Government Spending (figures for 2021/22)

Data from March 2021 Budget – future expenditure includes schemes to reduce energy prices

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 Fiscal / Supply side policy

What types of taxation are used in the UK?

Task - Complete the types of tax table, giving details of how each tax is
used in the UK / how it works.

What types of taxation are used in the UK?

Direct taxes – taxes levied on an individual or organisation

Indirect taxes – taxes levied on goods/services

Progressive taxes – the marginal rate of tax increases as income

rises

Regressive taxes – the marginal rate of tax falls as income rises

(causing a rise in inequality)

Proportional taxes – a constant marginal rate of taxation

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 Fiscal / Supply side policy

What types of taxation are used in the UK?

Income Tax
 This is called
progressive,
redistributive taxation. Year 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23
This principle has been
developed since 1909.
Personal £11500 £11850 £12500 £12500 £12570 £12570
Basically, the principle
is, earn more, pay more allowance
to share more.
20% rate £11501- £11851- £12501- £12501- £12571- £12571-
 During the 2010-11 tax
£45000 £46350 £50000 £50000 £50270 £50270
year, the basic personal
was withdrawn from 40% rate £45000 - £46351 - £50001 - £50001 - £50271 - £50271 -
those earning greater
than £100,000 £150000 £150000 £150000 £150000 £150000 £150000

 The removal of a 10% 45% rate Over Over Over Over Over Over
bracket was very £150000 £150000 £150000 £150000 £150000 £150000
controversial.
 From April 2013 the
50% rate was reduced
to 45%
 Scotland has different
income tax rates

What types of taxation are used in the UK?

For many people their marginal tax rate looks as follows –

this is due to the removal of child benefit payments (at £50,000)
and the loss of the tax allowance (at £100,000)

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 Fiscal / Supply side policy

What types of taxation are used in the UK?

Value Added Tax (is it progressive or regressive – see next slides)

There are 3 rates of VAT:

1.a standard rate, currently 20.0%
2.a reduced rate, currently 5% (e.g. energy, children car seats)
3.a zero rate (e.g. food, books, public transport)
https://www.bbc.co.uk/news/av/uk-39498677

Some markets were given a temporary reduction in VAT during the

pandemic.
https://www.bbc.co.uk/news/explainers-53334098

What types of taxation are used in the UK?

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 Fiscal / Supply side policy

What types of taxation are used in the UK?

What types of taxation are used in the UK?

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 Fiscal / Supply side policy

What types of taxation are used in the UK?

National Insurance

Paid by individuals and companies with rates between 2 and 15%.

Some employers may receive a rebate for low paid workers.

What types of taxation are used in the UK?

Corporation Tax
19% of company profits

Future changes -
Corporation tax charge
and main rate to be
increased to 25% for
the financial year
beginning 1st April 2023

Small Profits Rate at

19% for the financial
year beginning 1st April
2023

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 Fiscal / Supply side policy

What types of taxation are used in the UK?

Council Tax - Sutton

The amount of council
tax you pay is based
upon a valuation of
your property that was
set by the Valuation
Office Agency in 1991,
which allocates each
dwelling into one of
eight bands.

What types of taxation are used in the UK?

Business Rates
 Business rates is a local tax that is paid by the occupiers of all non-
domestic / business property, in the same way that council tax is a tax
on domestic property.
 Business rates are charged on most business properties such as
shops, offices, pubs, warehouses and factories.
 The rateable value of the business property is calculated (this is
currently being recalculated) and then subjected to a multiplier
 It has been controversially changed in recent years
 Some businesses have experienced a rates holiday / reductions during
the pandemic.

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 Fiscal / Supply side policy

What types of taxation are used in the UK?

Excise Duties – taxes on certain (usually demerit) goods

Examples –

What types of taxation are used in the UK?

Excise Duties

Examples -

Future potential changes –

https://www.bbc.co.uk/news/business-59065778

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 Fiscal / Supply side policy

What types of taxation are used in the UK?

Excise Duties

Examples -

This was reduced in 2022 by 5p per litre –

https://www.bbc.co.uk/news/business-60850217

You would also pay VAT on these products

What types of taxation are used in the UK?

Inheritance Tax – tax on the estate (property, money, possession) of

someone who has died. Tax of 40% on any inheritance above £325000

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 Fiscal / Supply side policy

What types of taxation are used in the UK?

Capital Gains Tax –

Tax rates -
You pay a different rate of tax on gains from residential property than you
do on other assets. You don’t usually pay tax when you sell your home.

If you pay higher rate Income Tax -

If you’re a higher or additional rate taxpayer you’ll pay:
28% on your gains from residential property
20% on your gains from other chargeable assets

If you pay basic rate Income Tax -

If you’re a basic rate taxpayer, the rate you pay depends on the size of
your gain, your taxable income and whether your gain is from residential
property or other assets.

What types of taxation are used in the UK?

Reasons for Taxation What makes a good tax

What’s tax for? The 4 ‘R’s of tax :
https://youtu.be/HoSUuxbD9k8 (<4min.) • Fairness
• Revenue: Fund expenditure • Doesn’t discourage work
• Redistribution: Redistribute • Cheap to collect
income (reduce inequality) • Convenient to pay
• Repricing: Correct market
failure
• Representation
Comparison of UK taxation rates
⮚ Higher use of indirect (regressive) taxes than many European nations
⮚ Lower general taxation than the Eurozone average

Tax noncompliance: Tax Evasion (illegal) and Tax Avoidance (legal)

https://www.youtube.com/watch?v=5aDrUf0eQPc (<6min.)

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