Income Tax

Income Tax

Income Tax The tax is levied under one or more of five Schedules:

(1)Schedule A. Income from ownership of land and buildings (other than owner-occupation of homes).

(2) Schedule B. Income from the occupation of land other than buildings Orland occupied for a trade or business. This Schedule is now confined to woodlands.

(3) Schedule C. Interest from securities of U.K. and overseas Governments if paid in the U.K.

(4) Schedule D. Profits of trades, businesses and professions and certain other incomes including interest and income from abroad and some short-term capital gains. This Schedule is divided into eight cases, of which Case I, the most important, includes the profits of trades and businesses. The normal basis of assessment is the profit earned in the accounting year ending in the preceding year of assessment. Capitalallowances are given for some types of depreciating wasting assets.

(5) Schedule E. Income from all offices, employments or pension i.e. wages and salaries. This tax is collected under the P.A.Y.E. system.

Direct collection of tax is made in Schedules A, B and D. In Schedules C and E the tax is deducted at source and collected from the paying agents or employers. It is deducted at source by companies when paying dividends. Schedule A tax payable by owner-occupiers was abolished in 2003.

Income tax is a direct and progressive tax. In 2002 it yielded almost 3.000 million, equivalent to over £so per head of the population.

The economic issues raised by income tax are chiefly those of incentives and taxable capacity. At some point the yield may fall off because people may prefer leisure to taxed income. At a further point there may be dissaving to maintain personal expenditure. The tax redistributes income because the yield goes to provide services for all; it may therefore raise total national income by equalizing opportunities in education, raising health standards, improving housing conditions, and increasing the resources of people with low incomes by family allowances, money grants and other benefits. .


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