Direct & Indirect taxes

• The government funds services like the NHS and defence through taxation.
• Direct Taxes-

  • Income Tax – paid on wages.
  • Inheritance Tax – tax on inherited money.
  • Corporation Tax – tax on business profits.
  • National Insurance Contributions – funds pensions and welfare.
  • Council Tax – based on property value.
• Indirect Taxes

  • VAT – 20% on most goods/services. Some are VAT-free (e.g. children’s clothes).
  • Excise Duties – extra tax on tobacco, alcohol, fuel.
• Advantages of Indirect Taxes

  • Easier to collect.
  • Can discourage unhealthy purchases (e.g. alcohol, tobacco).
• Her Majesty’s Revenue and Customs (HMRC)

  • Collects taxes and enforces tax laws.
  • Administers state benefits.
  • Investigates fraud and tax evasion.