Explain why income tax in the UK is an example of progressive taxation.
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Answer: A progressive tax is a tax which takes a larger percentage from high-income earners than it does from low-income individuals; this means a person who is earning more will have a higher average tax rate. In UK, the basic rate of income tax is 20% which is paid on income over the income tax threshold of £10,400. When income increases people pay a higher % of their income in tax i.e. top rate of income tax is 40% and this is paid on earnings over £40,000 a year. Also, some people pay an additional rate of 45% for income over £150,000.
Thus, it can be seen that UK income tax system is progressive.
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