Tablet Ltd operates in both England and Scotland, making fudge. Table 1 below gives some examples of the pay received by Tablet’s employees living and working both sides of the border. All of these employees are below state pension age.
Table 1 Examples of pay at Tablet Ltd (2018/19 tax year)
Employee
Living in
Gross pay
Pay after tax and National Insurance
Average income tax rate
Julia
England
£26,000
£21,060.88
10.88%
Donald
Scotland
£26,000
£21,060.88
10.88%
Karl
England
£49,000
Jeanie
Scotland
£49,000
1.1 In your own words, define a ‘progressive tax system’. (2 marks)
1.2 Complete the missing information in Table 1 by using the Income tax and National Insurance calculator to find Karl’s and Jeanie’s pay after income tax and National Insurance have been deducted, and also report the average income tax rate for Karl and Jeanie (not the average total tax rate). (4 marks)
1.3 Based on the information in Table 1 (including your answers to Question 1.2), explain which country has the more progressive income tax system: Scotland or England. (4 marks)
1.4 Now imagine it is four years later (2022/23). Julia’s pay after income tax and National Insurance has risen to £25,300. Over the four years, inflation has averaged 3.5% a year. Using the Inflation calculator, select and report the relevant result from your calculation to help you explain whether in 2022/23 Julia can afford a (material) standard of living that is higher, lower or the same as today. (5 marks)
(Total marks available for Question 1: 15 marks)
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