1. Tax
Topic 5

2. What is the tax on business profits
What is the tax on business profits? VAT, Corporation Tax, Capital Gains Tax
When does the government set out its spending and tax policies? Budget, through the Bank of England, at an election
If the government needs more money to finance spending what will it do to tax levels? Increase or decrease
If people have to pay more tax, what will happen to people’s spending? Increase or decrease
Which one of these is an indirect tax? Income tax, national insurance, VAT
What VAT rate would you pay on the following (all different)? Gas, computer, children’s clothing
Which of the following is a flat rate of tax and which is a variable rate tax? VAT, income tax
Approximately how much is your personal allowance? £2,500 £5,000 £11,000 £41,000
Who sets the tax rates in the budget? Prime Minister, Governor of the Bank of England, Chancellor of the Exchequer
Another term for the government’s main tax is ‘Pay As You Earn’ PAYE. Which tax is it? N.I. VAT Income tax, Corporation tax
What tax do you have to pay when buying a house? N.I. VAT Stamp Duty Capital Gains tax
What is social justice? Rich paying tax to help poorer people, people being sent to prison for fraud
5% % %
Flat variable

3. Define the Key terms Annual Budget Capital gains tax Corporation tax
Direct tax
Excise duty
Indirect tax
Inequality of income
Infrastructure –Inheritance
Flat-rate tax
Redistribution of income
Social justice
Stamp duty (or stamp duty land tax)
Value added tax (VAT)
Variable tax

4. Key terms
Annual Budget – an outline, given by the Chancellor of the Exchequer,
of planned government expenditure for the next financial year.
Capital gains tax – a tax on the increase in value of an asset, such as
land or shares.
Corporation tax – a tax paid by businesses.
Direct tax – tax that is taken directly from income or wealth.
Excise duty – a tax levied on the manufacture or sale of specific goods,
such as tobacco and alcohol.
Indirect tax – tax that is charged on spending, or on goods and services
(eg VAT in the UK).
Inequality of income – a situation in which some people have much
higher incomes than others.
Infrastructure – the physical and organisational structures and facilities
that are needed for a society to run properly.
Inheritance tax – a tax levied on the value of property, or money,
bequeathed after death or given as a gift.
Flat-rate tax – tax that is the same proportion at all levels of income.

5. Redistribution of income – a government policy aiming to reduce
inequalities of income by increasing lower incomes and / or reducing
higher incomes in some way.
Social justice – the ideal that people should have equal opportunities and
equal access to resources.
Stamp duty (or stamp duty land tax) – a tax paid when buying property
or land.
Value added tax (VAT) – a tax that is added to the price of goods and
services.
Variable tax – tax that varies in level depending on income, ie a greater
proportion of tax is taken from higher incomes and a lower proportion
from lower incomes.

6. What is the tax on business profits
What is the tax on business profits? VAT, Corporation Tax, Capital Gains Tax
When does the government set out its spending and tax policies? Budget, through the Bank of England, at an election
If the government needs more money to finance spending what will it do to tax levels? Increase or decrease
If people have to pay more tax, what will happen to people’s spending? Increase or decrease
Which one of these is an indirect tax? Income tax, national insurance, VAT
What VAT rate would you pay on the following (all different)? Gas, computer, children’s clothing
Which of the following is a flat rate of tax and which is a variable rate tax? VAT, income tax
Approximately how much is your personal allowance? £2,500 £5,000 £11,000 £41,000
Who sets the tax rates in the budget? Prime Minister, Governor of the Bank of England, Chancellor of the Exchequer
Another term for the government’s main tax is ‘Pay As You Earn’ PAYE. Which tax is it? N.I. VAT Income tax, Corporation tax
What tax do you have to pay when buying a house? N.I. VAT Stamp Duty Capital Gains tax
What is social justice? Rich paying tax to help poorer people, people being sent to prison for fraud