The Tax System In The UK

Table of Content

THE UK revenue enhancement is the most perfect revenue enhancement system that could be devised. However few members of the populace appreciated this. How would you rectify their perceptual experience?


It has been suggested that over the old ages, the UK revenue enhancement system remained the most perfect revenue enhancement system. However, a few members of the society disagree and raise some statements against the UK revenue enhancement system. This essay attempts to turn out that the UK revenue enhancement system is a complete success system and to depict the function and development of revenue enhancement in the UK authorities. It takes a wide overview of the UK Tax system get downing on the historical background of UK revenue enhancement. Furthermore, it will demo how the types of chief revenue enhancements work and analyze their actions over the past old ages. Besides it describes the features of a revenue enhancement system with their benefits and the impact of revenue enhancement on behavior the of persons organisations.

This essay could be plagiarized. Get your custom essay
“Dirty Pretty Things” Acts of Desperation: The State of Being Desperate
128 writers

ready to help you now

Get original paper

Without paying upfront

A brief history of UK Taxation

Before we discuss the historical background of the UK revenue enhancement we can specify revenue enhancements as a compulsory levy, enforced by the authorities, on income or outgo. The taxpayer does n’t have anything in return. The aggregation of all revenue enhancements in an economic system and the regulations related to these revenue enhancements is referred to as the revenue enhancement system ( Lymer and Oats, 2010/11 ) .

At the beginning of the twentieth century revenue enhancement was paid to UK authorities by a million people. During the twentieth century the public outgo increased dramatically and nowadays income revenue enhancement in the UK is paid by the bulk of the working population.

In 1944 a new income revenue enhancement payment method was introduced with the name ( PAYE ) “ pay-as-you-earn ” . The monthly rewards and wages were deducted before it was received by the workers. However, the PAYE system was a success, because it has been a important in the decrease of bad debts. Besides the UK authorities was able to roll up any concern assets prior to any bankruptcy.

Since April 2005 the UK system is controlled by two Government sections ; The Inland Revenue and H.M.Customs and Excise. The Inland Revenue controls the followerss parts of revenue enhancement system: the income revenue enhancement, corporation revenue enhancement, capital additions revenue enhancement, heritage revenue enhancement, national insurance parts, stamps responsibilities, working revenue enhancement recognition and child revenue enhancement recognition, child benefit and other revenue enhancements like pupil loan refunds.

However, one of the most important events in the recent history of UK is that the Inland Revenue and H.M Customs and Excise consolidated into a individual organic structure. Since April 2005 they are jointly called Her Majesty ‘s Revenue and Customs ( HMRC ) holding a common direction construction for both sections. This consolidation consequences bring UK authorities in line with other developed states. As it can be seen in the past old ages, the UK revenue enhancement is altering twelvemonth per twelvemonth with new revenue enhancements.

Tax twelvemonth:

In 18th century the UK authorities used an accounting twelvemonth which ended on Lady Day but this later was changed from 25 March to 11 of April. So since today a revenue enhancement twelvemonth runs from 6 April 2010 to 5 April 2011 ( Lymer and Oats, 2010/11 ).

Tax System:

Income Tax

Income Tax is a revenue enhancement on income. Around 29.5 million persons pay income revenue enhancement in the UK. However non all income is nonexempt. For many old ages income revenue enhancement has been the biggest gross for the UK authorities. Furthermore each class of income revenue enhancement has its ain regulations and policies to make up one’s mind how much income should be assessed. The Income revenue enhancement is charged on wages from employment, on rental income from belongingss, on involvement from the Bankss and edifice societies, on dividends from companies and on the net incomes of the ego employed ( Download-it, 2010 ).

Corporation revenue enhancement

Corporation revenue enhancement is charged on the net income of UK companies. From 1965 corporation revenue enhancement became a detached revenue enhancement of the revenue enhancement system. Firms non resident in the UK wage corporation revenue enhancement merely on their UK net incomes. The net incomes of corporation revenue enhancement is charged are from income trading, investing and capital additions.

VAT ( Value added revenue enhancement )

Since 1973 VAT has became one of the chief beginnings of income in UK authorities. VAT is revenue enhancement which is paid on all gross revenues. The exchequer expects to raise ?60.7billion from VAT in the financial twelvemonth 2010/2011. The standard rate of VAT is 17.5 % ( Lymer and Oats, 2010/11 ).

Capital Taxs

They were introduced in 1965 which increased in wealth through the growing of capital value but removed from the development of capital addition revenue enhancement.Capital additions revenue enhancement is the revenue enhancement collected when the sale of assets make a net income. For illustration when you dispose an plus and after a few old ages you sell it or reassign it ( HMRC, 2010 ) .

Features of Tax system:

In modern footings, Adam Smith ‘s desirable the features for a revenue enhancement system that have been changed and re-stated as equity, certainty, convenience and efficiency. Equity is characteristic which is an of import voter for any revenue enhancement system as the authorities needs people to pay revenue enhancements on a just footing. Next is the certainty feature which is a good characteristic of the revenue enhancement system design. The ground is because the taxpayers know when and who they have to pay the revenue enhancements in revenue enhancement system. Following for convenience, the feature is that people know how to pay their liabilities to the authorities. Efficiency is divided by economic and administrative efficiency ( Lymer and Oats, 2010/11 ) .

The benefits rule for UK revenue enhancement

The UK authorities is designed to let for those who enjoy most of the societal benefits derived from revenue enhancement to pay the higher sum of revenue enhancements. Many services can non be deselected if a individual does non desire to have the benefit. However, one of the chief benefits that UK revenue enhancement system provides are the Defense and Law, that citizens are committed to pay. On the other manus, some services that can non lend to their costs and are likely when householders or concerns can fall in the fire services at the same clip as automobilist with roadside aid bureaus. Another illustration is instruction. The authorities produced a benefit for society to pay straight or non the revenue enhancements. Under the age of 16, instruction is free of charge for kids in UK.

In the recent history some hypothecated revenue enhancements came to come up like vehicle excise responsibilities. The reception of this revenue enhancement used for main road building and care. Furthermore another illustration is the Television license fee. Every citizen in UK who has Television must pay revenue enhancement. Peoples are willing to pay wellness attention. An of import step of benefit of hypothecated revenue enhancements is the National Health Service. As we can see at that place a batch of of import services of revenue enhancements that offer profit to UK authorities for the hereafter.

A progressive revenue enhancement must hold two rates of revenue enhancement. Progressive revenue enhancement is when the authorities takes a larger per centum revenue enhancement from the income of high-income people than from low-income people. However, income revenue enhancement is progressive and a good illustration is to compare the mean rate of revenue enhancement ( ART ) with the fringy rate of revenue enhancement ( MRT ) from the taxpayer. For case if the MRT is less than ART so is progressive. In UK the revenue enhancement is progressive.

Regressivity is when the revenue enhancement takes a larger per centum from low-income people than from affluent people. The ground for the regressive VAT because charge at fixed rate 17.5 % on the points in UK. So the low income taxpayers spend a higher proportion of their income on VAT than the higher income people. Besides another job in UK authorities is balance on some policies to cut down the VAT on some points. That is why the VAT is still a regressive revenue enhancement in UK revenue enhancement system.


To reason I believe that UK revenue enhancement system has a really good system in the most revenue enhancements but there are some betterments that could be change in the hereafter. In twenty-first century the UK revenue enhancement system could be described as a just system by the most people who pay the UK revenue enhancements. However as every revenue enhancement system in the universe the UK revenue enhancement system has some revenue enhancements which are unjust such as for the Television licence fee. I believe that, this revenue enhancement is non just for everyone who pay it old ages ago. Nowadays every family has Television in UK but some people do n’t pay the Television licence fee which is non just for those who pay. There is no balance in this revenue enhancement.

On the other manus a progressive revenue enhancement, like income revenue enhancement is just and logical to everyone. It is clear that the UK system has a progressive system on income revenue enhancement as we discuss earlier. This is an of import facet for taxpayers particularly for the low-income people. The lower income people pay low revenue enhancement and higher income wage higher revenue enhancement. This revenue enhancement is helpful because there is a balance between rich and hapless people in UK society. This chief revenue enhancement can depict the UK revenue enhancement system as an organized and just system.

Cite this page

The Tax System In The UK. (2018, Apr 10). Retrieved from

Remember! This essay was written by a student

You can get a custom paper by one of our expert writers

Order custom paper Without paying upfront