Question

The UK currently has a progressive income tax system. The rules are as follows:

1. Any earnings under 11, 500 GBP are taxed at 0%.
2. Any earnings between 11, 500 GBP and 33, 500 GBP are taxed at 20%.
3. Any earnings between 33, 500 GBP and 150,000 GBP are taxed at 40%.
4. Any earnings above 150,000 GBP are taxed at 50%.
A person earns 50,000 GBP gross. How much tax do they pay?
Give your answer in pounds to the nearest pound. Do not include commas or the pound symbol in your answer.
Provide your answer below:

a) 0 GBP
b) 6,500 GBP
c) 8,500 GBP
d) 10,000 GBP

Answer 1

To calculate the tax a person earning 50,000 GBP gross would pay in the UK's progressive income tax system, we need to determine the earnings within each tax bracket and apply the corresponding tax rates. The total tax owed is 11,000 GBP.

Step-by-step explanation:

To calculate the amount of tax a person earning 50,000 GBP gross would pay, we need to determine the earnings within each tax bracket and apply the corresponding tax rates.

• Earnings under 11,500 GBP are taxed at 0%. Therefore, no tax is owed on the first 11,500 GBP of income.
• The earnings between 11,500 GBP and 33,500 GBP are taxed at 20%. Therefore, the amount of income in this bracket is 33,500 GBP - 11,500 GBP = 22,000 GBP. The tax owed on this income is 20% * 22,000 GBP = 4,400 GBP.
• The earnings between 33,500 GBP and 150,000 GBP are taxed at 40%. Therefore, the amount of income in this bracket is 50,000 GBP - 33,500 GBP = 16,500 GBP. The tax owed on this income is 40% * 16,500 GBP = 6,600 GBP.
• No earnings are above 150,000 GBP, so no tax is owed in the 50% tax bracket.

The total tax owed is 0 GBP + 4,400 GBP + 6,600 GBP = 11,000 GBP. Therefore, option d) 10,000 GBP is the correct answer.