Tax and Society What is tax

Tax and Society

What is tax? • (An amount of) money paid to the government, which is based on your income or the cost of goods or services you have bought (definition – Cambridge Dictionaries Online)

Who pays tax? • Anyone who has an income – wages, pensions etc – pays Income Tax. • Anyone who buys certain types of goods and services pays Value Added Tax (VAT). • Many companies and businesses pay Corporation Tax.

How much income tax do people pay? • Income tax is payable on all income above a certain personal allowance. • In 2011 -12 the personal allowance = £ 7, 475 • The next £ 35, 000 is taxable at 20%. • Income between £ 42, 475 and £ 150, 000 is taxable at 40%. • Income above £ 150, 000 is taxable at 50%.

There are many types of tax that contribute to the UK’s budget. They include: • Income Tax — a tax on your personal income whether you are employed or self employed. This includes wages, pensions and interest on savings • Corporation Tax — paid by companies on their profits • Excise Duties — there are various excise duties, including Car Tax and tax on goods such as alcohol and tobacco • Value Added Tax (VAT) — you pay VAT, included in the price, when you buy goods and services. Some goods, including food and newspapers, don't attract VAT • Council Tax — a tax on the value or size of the home you live in, which helps pay for local services such as policing and rubbish collection.

UK public spending 2010– 11 • Total public spending was expected to be around £ 696 billion for the year 2010– 2011 • This equals around £ 11, 262 for every man, woman and child in the UK. • The biggest spending was on social protection (which includes cash benefits for sickness and disability, old age pensions, family benefits, tax credits).

UK public spending 20091– 11 • Social protection £ 194 billion • Health £ 122 billion • Education £ 89 billion • Defence £ 40 billion • Public order and safety £ 35 billion

UK public spending 2010– 2011

When do you pay VAT and how much? Each EU country has its own rates of VAT. In the UK there are three: • Standard rate You pay VAT on most goods and services in the UK at the standard rate, which is 20 per cent. • Reduced rate In some cases, for example children's car seats and domestic fuel or power, you pay a reduced rate of 5 per cent. • Zero rate There are some goods on which you don't pay any VAT e. g. food (but NOT crisps, sweets and fizzy drinks), books and magazines.