Hello.

My name's Ms. Ikomi.

I'm a citizenship teacher from London, and I'm going to be taking you through today's lesson.

Let's get started.

Today's lesson is called "Why should we pay tax?" It is part of the wider unit, "How does the economy work?" By the end of today's lesson, you will be able to explain the different types of tax and arguments in support and counter to the idea of equal taxation.

Let's get started.

The key words we're gonna hear in today's lesson are tax.

These are the charges imposed by the government on citizens and corporations to finance some of the spending that the government does.

National insurance, these are contributions paid from money earned to enable individuals to qualify for certain benefits and the state pension.

We're going to start by thinking about what are the different types of tax.

Taxes, as we saw from our keyword definition, are payments that individuals and businesses make to the government.

These funds that come in are used to pay for really important public services that we all use, things like healthcare, the NHS, or education, having free schools, also infrastructure, things like paying for the roads.

There are lots of different types of tax, each of which is designed to collect money in different ways.

The main types of tax are income tax.

This is a tax on earnings that are above the personal allowance threshold.

We'll learn about what that is later.

Those who pay that are people who are employees, self-employed, or those that have a taxable income.

National insurance tax are a specific type of contribution that fund state benefits like pensions and NHS.

Again, employees, employers, and self-employed individuals will pay national insurance tax.

Value added tax is a tax on most goods and services.

In 2025, this was 20% for standard goods.

Anyone who buys things will pay value added tax.

Businesses will collect it on behalf of HMRC.

All of these taxes work together to ensure that the government has enough money to run the country.

The government has to ensure that they can provide services for everyone and balance the budget between what they take in and what they're spending.

In the 2023 to 2024 financial year, the UK government generated approximately 1.

1 trillion pounds in revenue.

This came from taxes and other sources.

This accounted for around 40% of the UK's gross domestic product, GDP, marking the highest since the early 1980s.

most of this revenue came from three key taxes, income tax, national insurance contributions, and value added tax.

We saw those definitions and who pays them on the slide before.

Collectively, these three taxes brought in around 626 billion pounds.

Income tax is tax that is taken from people's earnings.

That is the money that they make through working.

In the UK, we have a tax system that means that the more somebody earns, the more tax that they will pay.

This is called progressive taxation.

It means that people with higher incomes contribute more to public services.

People with lower incomes may pay little or no income tax at all.

For example, someone earning 12,000 pounds would pay zero pounds while somebody earning 30,000 pounds would pay around 3,486 pounds in income tax.

We're going to think about how that figure is broken down.

Let's do a check.

In the UK, the more someone earns, the more tax they pay.

This system is called what? A, regressive taxation, B, aggregate taxation, C, progressive taxation, or D, universal taxation.

Pause your video and choose your answer now.

The correct answer is C, progressive taxation.

As of February 2025, people in the UK are given a personal allowance of 12,570 pounds.

Anything below this that they make, they will not pay income tax on.

After this, it is progressive.

Let's look at how that might break down.

Your personal allowance amounts to that amount of 12,570 pounds.

You pay 0% tax on that money.

Then there is a basic rate of tax.

This is anything between 12,571 pounds to 50,270 pounds.

You would pay 20% on any of those earnings.

Then there is a higher rate.

that is 50,271 pounds to 125,140 pounds.

That is 40% tax rate, and then the additional rate is anything over 125,141 pounds, and that has 45% tax rate.

Anyone who earns over that amount of money, for example, 50,270, would only pay the percentage of tax on the income that goes above that threshold.

It's not on their entire earnings.

So what that looks like in practise is, Ashwin who earns 60,000 pounds a year pay 0% tax on the first 12,570 pounds because that is the personal allowance that everybody in the UK would have.

That means that the taxable income left over is 47,430 pounds.

Ashwin would pay 7,540 of that on income tax, that would be 20%, and they would pay 3,888 pounds and 40 pence on the income tax at 40%.

So in total, they would pay 11,428 pounds and 40 pence on their whole salary as opposed to paying 40% on a big chunk of it.

National insurance helps to fund benefits that we have or will have access to in the UK, such as the NHS, state pensions, and unemployment support.

Employees and employers pay national insurance contributions and self-employed workers also contribute, but this looks a little bit different.

In the October, 2024 budget, the chancellor who was Rachel Reeves announced significant changes to national insurance contributions.

These would affect employers.

It was announced that the employer national insurance contribution rate would increase.

Before, it was 13.

8%, then it would be 15% effective from April 2025.

They also lowered the earnings threshold.

That is a threshold at which employers start paying national insurance contributions on employee earnings.

This was reduced from 9,100 pounds to 5,000 pounds per year.

They also had employment allowance adjustment.

The employment allowance, which reduces the national insurance bill for eligible employers was increased from 5,000 to 10,500 pounds.

They also said that 100,000 pounds eligibility cap was removed.

That meant that more businesses would benefit from that.

An example of this in practise is as follows, Pedro is an employer.

He wrote the budget on the government website.

He's now worried that he has to pay more money to the government in national insurance contributions.

Let's see what Pedro has to say.

"I'm worried that I'll have to get rid of staff as I won't make enough money to pay them.

I did read the government remove the 100,000 pound eligibility cap, so I might now qualify for certain tax benefits or support schemes that were previously limited to people earning below this threshold, so actually I might benefit after all." We can see that all policies that are put into place by a government have to be balanced out between making sure they're making enough money but also have enough money to spend.

These budget measures in October 2024 aim to raise additional revenue for public services, but they raise concerns among businesses such as Pedro's business.

They were worried about increased cost to operate the business and also the potential impacts that might have on who they can employ.

The chancellor replied to this and said that the government had to balance the budget and stabilise both inflation and the economy as a whole.

Let's do a check.

I'd like you to read the sentence below and fill in the missing word.

Pause your video and have a go at this now.

Let's check our answers.

In the October 2024 budget, the chancellor changed national insurance contributions.

The employer contribution was increased and the earning threshold was lowered.

Well done if you got that correct.

Value added tax is a tax on goods and services.

It's included in the price of lots of everyday items that you will have bought, maybe clothes, electronics, restaurant meals.

In February 2025, the standard rate of VAT was 20%.

Some essential goods, however, have a lower VAT or are exempt, meaning that you don't pay VAT on those items. For example, if you buy a new laptop for 1,000 pounds, 200 of that price is VAT.

But if you buy children's clothes worth a hundred pounds, none of that is VAT.

People who own or rent property have to pay council tax.

This is a certain type of tax that helps to fund local services, such as having the rubbish collected, such as having streets cleaned, or contributing to some schools, library, or police services.

The amount that people pay in council tax depends on the value of a person's home and the local council's needs.

A household in an average Band D property in England might pay around 2,000 pounds per year in council tax, whereas a couple living in a Band A one-bedroom flat might pay around 1,350 pounds.

So there are different factors that contribute to this amount.

Due to the needs of different councils, it might be increased at an affordable rate at different points.

An example of these different needs can be seen in the council tax rise in Birmingham that happened between 2023 and 2025.

Birmingham City Council had a lot of financial difficulties.

They needed to pick money up from somewhere, so that meant that they had to increase the council tax to balance their budget.

In April 2024, they got a special permission from the government in order to be able to raise the council tax by 10%.

In the financial year 2025 to 2026, there is a planned 7.

49% rise.

That amounts to around 17.

5% over just two years.

The reason they had to raise this council tax was because equal pay claims were costing 650 to 760 million pounds.

There were IT system failures requiring up to 90 million pounds to fix.

There was a higher demand for services and funding cuts.

All of this together resulted in the council being in a position where they did not have enough money to balance their budgets.

That meant that they had to declare for bankruptcy.

That means that you say that you don't have enough money to cover your costs.

In September 2023, Birmingham City Council implemented tax hikes and 148 million powers in budget cuts.

That meant that they had to reduce certain things such as social care.

Of course we can see how this might have an impact on the local community, and ultimately, it caused a lot of upset.

People felt that they were paying for the council's mistakes and the services that they were getting were actually decreasing despite the fact that they were paying more.

Let's do a check.

What does council tax not fund? Pause your video and choose an answer now.

The correct answer is D, the NHS.

That comes from different taxes.

Another type of tax that businesses have to pay is called corporation tax.

This is tax paid on companies' profits.

Businesses that make more money will pay more in corporation tax.

This helps the government to fund public services and also encourages businesses to grow and contribute to the economy.

For example, a company that is making 500,000 pounds in profit will currently pay 25% corporation tax.

This would occur from February 2025.

That equals about 125,000 pounds.

Another type of tax is called excise duties.

These are taxes on specific products, such as alcohol, tobacco, and fuel.

These taxes are often higher to discourage people from using products that are gonna be harm for their health or to help reduce pollution for the environment.

For example, the fuel duty is a tax included in petrol and diesel prices.

It helps to fund transport infrastructure and environmental initiatives.

The duty on a litre of petrol in the UK in February 2025 was 52.

95 pence.

There are other types of tax that might affect us at some point during our lives.

Capital gains tax is a tax on profits made when selling assets like property, excluding homes or shares with rates depending on the income.

Vehicle excise duty is also known as road tax.

It's charged on most vehicles based on their emissions, fuel type, and engine size.

Air passenger duty is a tax added to the price of plane tickets for flights departing from the UK.

It's higher if you're going on long haul flights.

Dividend tax is a tax on income earned from shares, with different rates depending on how much a person earns.

Insurance premium tax is a tax added to insurance policies, like car, home, and travel insurance.

Landfill tax is a tax on waste that is sent to landfill designed to encourage recycling and reduce environmental damage.

Plastic packaging tax is a tax on plastic packaging that contains less than 30% recycled material aimed at reducing plastic waste.

Stamp duty land tax is a tax on property purchases above 250,000 pounds or 425,000 pounds for first time buyers.

We've looked at lots of different types of tax.

Let's see what we can remember.

I'd like you to match up the type of tax with when somebody would pay it.

Pause your video and have a go at this now.

Let's check our answers.

Capital gains tax is a tax that someone pays when selling property.

Air passenger duty is a tax that we pay when buying plane tickets.

Landfill tax is a tax that people pay to dispose of things in a landfill.

And stamp duty land tax is a tax that people pay if buying property.

Well done if you got those correct.

Let's put this into practise.

I'd like you to identify four types of tax and summarise in a sentence what they are.

Pause your video and have a go at this now, I asked you to identify four types of tax and summarise what they are.

You might have included some of the following.

You could have spoken about income tax.

This is a tax on earnings from employment, self-employment, or pensions, and there are different rates depending on different income levels.

National insurance, this is a tax on earnings that helps fund state benefits, like the NHS pensions and unemployment support.

Value added tax, this is a tax on most goods and services usually charged at 20%, reduced rates for some essential items however.

Corporation tax, a tax on company profits currently set at 25% for most businesses in the UK.

Next, we're going to think about whether we should all pay the same tax.

Lots of areas in the local and national community rely on tax contributions from individuals and businesses.

Without tax, the government wouldn't be able to provide vital services.

It would make life harder for people to access.

Therefore, it's really important that we pay some tax.

However, there is a debate about whether we should all pay the same tax or whether we should stick to the system of progressive taxation like we currently have.

The government collects tax to fund essential services, and it does give benefits to everybody in society.

Without tax, we wouldn't have healthcare schools, emergency services or transport systems. The money raised from different taxes is really carefully allocated to make sure that the country's running smoothly and supports everyone.

Some of the public services that we know are funded by tax include healthcare, for example, going into a hospital or using your GP service.

Education, paying for schools, and paying teachers, and people that work within schools.

Transport, making sure our roads and railways are fit for purpose.

Welfare and benefits, things like universal credit or state pensions that support people financially.

Emergency services like the police, the fire brigade, and ambulance services all rely on tax money.

Defence and security, so armed forces, counter-terrorism units, they're also are promoting national security.

Local services like rubbish collection and street cleaning, housing and homelessness support.

Things like council housing and assistance for people who are sleeping rough.

Environment and energy, things like climate policies, renewable energy, and flood defences.

Let's do another check.

True or false.

Without tax public services would run smoothly.

Pause your video and have a go now.

The correct answer is false.

This is because public services rely on the money that's collected from taxes.

If there was no taxes, there'd be no money so there wouldn't be enough to be able to support people, for example, having things like free healthcare.

There is a debate on whether or not people should pay the same amount of tax.

Some people believe that since everyone uses public services, we should all pay the same tax.

Others argue that those who use public services more should contribute more through taxes.

There are lots of different perspectives to this question.

We're going to consider some of these in the next few slides.

We're thinking about the question, should we all pay the same tax? The idea of everyone paying the same tax might seem fair initially, but it does make us think about really important things about equality and fairness.

Supporters of a progressive tax system argue that it ensures that people that have more money or resources contribute more to society.

One example is the NHS, which is funded through taxation.

Everyone in the UK has access to free healthcare, no matter how much tax you pay.

Some people say this is unfair because individuals might make unhealthy choices.

For example, if you smoke, you might then require medical treatment.

On the other hand, smokers do contribute an extra tax through excise duty on tobacco products.

That means that they're actually paying more into the system than non-smokers.

This raises another important question.

Should people who place a higher burden on public services contribute more? The concept of a flat tax system where everyone pays the same percentage of their income is sometimes suggested as a bit of a fairer alternative.

For example, if everyone paid 20% of their income in tax, higher earners would still pay more in total, while lower earners wouldn't benefit from reduced tax rates.

However, people who don't like this idea argue that the approach would have a bigger impact on those people who are at the bottom on lower incomes.

20% of a lower wage would affect their standard of living, much more than the same percentage taken from a higher wage.

Another argument against equal taxation is the role of wealth and opportunity.

People who are earning higher incomes often have better access to education, healthcare, and career opportunities.

That might be influenced by factors such as inherited privilege.

A progressive tax system aims to redistribute wealth and fun programmes that support people that may not have this privilege, such as free school meals and housing assistance.

Let's do a check.

An argument against equal taxation is, A, the role of fairness and equality, B, the role of wealth and opportunity, C, the role of income and expenditure.

Pause your video and choose your answer now.

The correct answer is B.

Well done if you got that correct.

Taxation is often something that comes up in the run-up to a general election.

People are really interested in this issue, so therefore politicians know when they're campaigning they need to make sure they have clear policies.

In the 2024 general election, all parties included tax in their manifestos.

The Labour Party said it would not increase national insurance, income tax, or VAT.

The conservative party committed to not increasing the rates of three main types of taxes, but also promise to reduce employee national insurance by further two pence.

These examples of different views on taxation are really important during an election because lots of people obviously feel very passionately about this.

They can see the money disappearing from their payslip.

And if they don't feel that they're getting good value for money, if public services aren't working well for them, then they're not going to feel very happy about that.

A party's stance on tax can be the difference between whether the public will vote them into parliament or not.

They might be too worried to vote for them if they think that they are going to have an impact on the economy that might not necessarily benefit that person.

We have seen some arguments in support of paying the same tax and against paying the same tax.

Let's have a look at them.

Arguments in support of paying the same tax are that a flat tax system is simple and easy to understand.

Everyone will be treated equally paying the same percentage or amount.

High earners would not be penalised for financial success.

Argument against are that a progressive tax system ensures that those who earn more contribute more to society.

Lower earners would struggle as a fixed tax rate takes a larger proportion of their income, and wealthier individuals have more financial advantages, so therefore they can afford to pay more tax.

Let's look at some more arguments.

On the for side, people who use more public services like healthcare would not be unfairly subsidised by others.

It could encourage economic growth by allowing businesses and individuals to keep more of their earnings.

It may motivate people to become financially successful as they won't be taxed more for earning more.

On the other side, some people do already contribute more through things like excise duty.

It reduces government income and it may lead to cuts in essential services like the education system or the NHS.

It could increase inequality.

The wealthy might benefit whilst lower earners might struggle to afford basic living costs.

Let's do a check.

I'd like you to read the sentence below and fill in the missing words.

Pause your video and have a go at this now.

Let's check our answers.

Paying the same tax could encourage economic growth by allowing businesses and individuals to keep more of their earnings.

However, this would reduce the government's income, which might lead to cuts in essential service.

Let's put this into practise.

Jun has given us a statement.

"We should have a flat tax system as it is simple and easy to understand." I'd like you to put an X on the line showing how much you agree or disagree with Jun.

Then I'd like you to write a paragraph providing a clear argument for how you formulated your opinion.

Pause your video and have a go at this now.

I asked you to decide how much you agreed or disagreed with Jun.

Your answer might have looked like this if you disagreed.

A progressive tax system ensures that those who earn more contribute more to society.

A flat tax system could increase inequality as the wealthy benefit while lower earners struggle to afford basic living costs.

A progressive tax system helps to redistribute wealth and fund programmes that support disadvantaged individuals such as free school meals and housing assistance.

If you were on the other side, your answer might have looked like this.

A flat tax system is a fair and efficient approach to taxation.

Its simplicity makes it easy for everyone to understand, ensuring that all tax payers are treated equally by paying the same percentage.

By allowing businesses and individuals to keep more of their earnings, a flat tax system could also drive economic growth by allowing businesses and individuals to keep more of their earnings.

Today we have been learning about why we should pay tax.

We have learned that tax is the main source of government revenue and fund essential public services, such as healthcare, education, and infrastructure.

The UK has various types of taxes, including income tax, national insurance, VAT, corporation tax, and excise duties.

A progressive tax system ensures that higher earners contribute a greater percentage of their income whilst a flat tax system would apply the same rate to all individuals.

Arguments and support of equal taxation include simplicity and uniformity, whereas counter arguments highlight the disproportionate impact on lower earners and the need for wealth redistribution.

Taxation policies influence economic stability, public services, and social equality.

That's the end of today's lesson.

Thank you for joining me.