Session 10: How Does the System of Tax Actually Work?
Start thinking: Has tax alredy been paid on this?
A can of fizzy drink
Taxed: VAT, plus the Soft Drinks Industry Levy (‘sugar tax’).
Your monthly pay
Taxed: Income Tax and National Insurance, deducted before money even arrives.
A video game
Taxed: VAT is included in the price.
Cinema tickets
Taxed: VAT is built into the ticket price.
10 litres of petrol
Taxed twice: Fuel Duty, then VAT charged on top. A tax on a tax!
A mobile phone bill
Taxed: VAT is included in the monthly charge.
Every one of those items is taxed. If you bought a drink, video game, or paid a phone bill this week, you’re a taxpayer.
However, tax isn't added to everything. Essential items like basic food, children's clothes, and books are ‘zero-rated’, meaning that they include no tax and stay affordable for everyone. For almost everything else, tax is built into the price tag.
Today’s Big Question:
Is tax a loss or an investment in society?
Is tax a loss or an investment in society?
PATHWAY 1
Tax: You're Already Paying It
10 mins
PATHWAY 2
Where Does The Money Go?
10 mins
Finished? Have a go at the Taxpayer Minigame.
Govern ITZAland
You are the government of ITZAland, responsible for deciding
how to spend the money raised from taxes.
Every worker earns the same £42,570 salary and is a basic-rate taxpayer, meaning ITZAland has a budget of £60 billion raised using these taxes:
1. Personal Allowance | 2. Basic Rate 20% | 3. Scale it up |
First £12,570 of the £42,570 salary is taxed at 0%. Taxable income = £30,000 | 20% of £30,000 = £6000 income tax per worker, per year | £6000 x 10,000,000 taxpayers = £60 billion national budget |
Govern ITZAland
In the recent election, you committed to two rules:
Rule 1: Nothing shuts down | Rule 2: Nothing dominates |
Every spending area must receive at least £2 billion. No public service can be cut to zero. | No single area may receive more that £24 billion - even your biggest priority can’t swallow the whole budge. |
The total must add up to exactly £60 billion (including the £6bn debt interest already included).
Where can the money go?
Six spending areas:
Health
Roads, railways, housing, broadband, flood defence, green energy
Fixed at £6 billion - already paid, cannot be moved.
Hospitals, GPs, nurses, medicines, emergency care
Education
Welfare & social care
Infrastructure
& environment
Schools, teachers, colleges, learning support
Defence, justice & local services
Armed forces, police, bins, courts, libraries, parks
Debt interest
Support for older, disabled, unemployed and low-income people
Copy the table to plan your budget. (5 minutes)
Spending Area | £ billion | Why? |
Health | | |
Education | | |
Welfare & Social Care | | |
Infrastructure & Environment | | |
Defence, Justice & Local Services | | |
Debt Interest | £6 billion | (fixed) |
TOTAL | £60 billion | |
As you plan, discuss:
Scenario C:
Climate Crisis
Major flooding and storm damage. Roads, bridges and homes need repair, and people worry about future climate risks.
Scenario B:
Young Nation
There are lots of children and young people, with overcrowded schools, teachers needing more support, and rising youth unemployment.
Scenario A:
Ageing Nation
The population is growing older. Hospitals are busy, care homes are under pressure, and more people need help at home.
Govern ITZAland
You have to change plans because of a new situation. Choose one from below and adjust your budget (3 minutes).
Debrief: Govern ITZAland
1. One government spokesperson from each group explain how your government allocated the budget. 2. Discuss: what are the differences between the budgets and which budget works best? 3. Discuss: what was something that governments wanted to fund but couldn't? What are the consequences of this? |
WE HAVE COVERED:
Learner Journal
Part 1: Three Things I Learnt Today
Open your Learner Journal. Write down three things you learnt. These can be facts, ideas, or things that surprised you.
How has your understanding of tax changed today, and which idea
made you see it differently?
Write your response in your Learner Journal, then finish sections 3-5.
Learner Journal
Part 2: Reflective Question
"Taxes…are the dues that we pay for the privileges of a membership in an organized society." Franklin D. Roosevelt, US President (1936)
Tax is not just money taken from you - it is money you invest in the society you live in. The roads, schools, hospitals, and emergency services that make daily life possible exist because everyone contributes through their taxes.
Lock-In Quote
Extension Activities
Extension 1
Extension 2
The Tax That Broke An Empire
The Count & The Revolution