Income Tax. 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.

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Presentation transcript:

Income Tax

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

What are the main types of tax paid by individuals? Income Tax (also known as PAYE) A tax on your personal income whether you are employed or self employed. It includes wages, pensions, interest on savings. You pay it on your income in the tax year from 5 April to the following 6 April. Income tax is collected under PAYE on wages and pensions. Excise Duties There are various excise duties – they include 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 newspapers and food (but excluding crisps and sweets) don't attract VAT. Council Tax A tax on the value or size of the home you live in to help pay for local services like policing and rubbish collection.

What does PAYE stand for? Pay All Your Earnings Pay As You Earn Pay At Your Ease

At what age can you start paying income tax? a.16 b.18 c. 0

What is a personal allowance? The money you get back if you have overpaid your tax The money you can earn before paying tax The extra money you pay if you have underpaid your tax

What are the basic, higher and additional tax rates in ? a.Basic 10%, higher 25%, additional 40% a.Basic 20%, higher 50%, additional 60% a.Basic 20%, higher 40%, additional 50%

Answers to multiple choice questions 1.PAYE = Pay As You Earn 2.There is no minimum age to pay income tax – you just need to have an income. 3.Your personal allowance is the money you can earn before paying tax (and was set at £7,475 for 2011/2012). 4.The basic tax rate is 20% on income up to £35,000 above the personal allowance. The higher tax rate is 40% on income between £35,001 above the personal allowance and £150,000. Above that, income is taxable at 50%.

Meet Bill McGonagle William A McGonagle (nicknamed Bill) is a carpenter working for a small company called Flywheel and Driftwood based in Grimsby. He’s been there for three years and is particularly good at roofs and stairs. At the end of each week Bill gets his payslip and the company pays the money into his bank account. Bill went to university to study design and technology. Now he’s earning enough to start paying off his student loan (£11 a week)

Bill’s pay … How much goes into the bank account depends on how many hours he works. He gets £50.00 basic pay a week, plus £10.00 an hour. Most weeks, he does about 37 hours, so his gross pay before deductions (tax and so on) for the week is £ Bill gets a personal allowance like everyone else (that’s £7,475 tax-free for the tax year – the amount usually changes every year).

…and deductions Each week when he gets his pay, Bill checks his payslip. On a typical week’s pay of £ the company takes off: basic rate income tax at 20% (that comes to £55.20) National Insurance (£33.72) student loan repayment (£11.00) Bill’s contributions to the company pension scheme (£10.00 a week) non-taxable deductions (£40 a week for season ticket recovery) On the next page you’ll see one of Bill’s payslips.

Bill McGonagle’s payslip