Tax: who pays what
The five big taxes, how much each raises, and how to work out shares, changes and what ‘fair’ might mean.
Suits: Citizenship, economics, maths, PSHE. Levels: ages 11–14, 14–16 and 16+. Rebuilt every night from the latest figures.
2025-26. The biggest tax.
Paid on pay by workers and employers.
Added to most things people buy.
Average tax from these five taxes for each person in the UK.
Words to know
- Income tax
- Tax on pay, pensions and some other income.
- National Insurance
- A tax on pay that builds entitlement to some benefits and the state pension.
- VAT
- Value Added Tax: a tax on most goods and services, added to the price.
- Progressive tax
- One where people with more income pay a bigger share of it.
- Receipts
- Money the government actually received.
- Tax band
- A slice of income taxed at one rate.
Charts
% of the economy. All money collected, as a share of the economy. 2006-07 to 2025-26.
Source: HM Treasury (PESA), HMRC and ONS public sector finances
£ billion. Money raised by each tax.
Source: HMRC
Money raised by each tax, £ billion
| Tax | 2024-25 | 2025-26 | Change | Share of these five |
|---|---|---|---|---|
| Income tax | 302.8 | 326.9 | ↑ Up 8.0% | 35% |
| National Insurance | 172.5 | 200.8 | ↑ Up 16.4% | 21% |
| VAT | 171.0 | 179.9 | ↑ Up 5.2% | 19% |
| Corporation tax | 90.9 | 95.1 | ↑ Up 4.6% | 10% |
| Fuel duty | 24.4 | 24.6 | ↑ Up 0.8% | 3% |
Cash terms. These five taxes are HMRC receipts; the government also collects council tax, business rates and other income.
Questions
Which tax raised the most money in 2025-26, and how much?
Answer. Income tax: £326.9bn. Next was national insurance (£200.8bn).
Name the five taxes in the table and put them in order, biggest first.
Answer. Income tax (£327bn), National Insurance (£201bn), VAT (£180bn), Corporation tax (£95bn), Fuel duty (£25bn).
Income tax is taken from pay. VAT is added to what you buy. Give one thing you buy that has VAT on it and one that does not.
Answer. Examples with VAT: clothes for adults, most electronics, restaurant meals. Usually no VAT: most food from shops, children’s clothes, books, public transport fares.
VAT raised £179.9bn and about 69.5 million people live in the UK. About how much VAT is that for each person?
Answer. 179.9 billion ÷ 69.5 million = about £2,589 each. (Companies and the government also pay VAT, so this is an average, not a bill.)
What percentage of these five taxes’ total (£937.8bn) came from income tax?
Answer. 326.9 ÷ 937.8 × 100 = 34.9%.
The three biggest taxes together: what share of the total do they raise?
Answer. Income tax, National Insurance, VAT: 707.6 ÷ 937.8 = 75%.
Income tax raised £302.8bn in 2024-25 and £326.9bn in 2025-26. Work out the percentage change.
Answer. (326.9 − 302.8) ÷ 302.8 × 100 = +8.0%.
Income tax receipts rose by more than a few per cent. Give two reasons receipts can rise without the government raising the tax rate.
Answer. Pay rises push more income into taxable bands; more people are working; allowances and thresholds that stay frozen pull more of people’s pay into tax (‘fiscal drag’); profits and bonuses can rise.
National Insurance raised £200.8bn. Is that more or less than VAT, and by how much?
Answer. More: 21.0 billion more than VAT (£179.9bn).
In 2025 to 2026, about 1.22 million people paid income tax at the additional rate out of 39.8 million taxpayers. What share of taxpayers is that, and what share of all income tax do they pay?
Answer. 3.1% of taxpayers pay 40% of income tax (£131bn of £329bn). (HMRC estimate for the year, from a survey.)
Those figures show a small group paying a large share of income tax. Does that show the system is fair or unfair? What else would you need to know?
Answer. It does not decide it by itself. It shows the tax is progressive (higher incomes pay a higher rate). To judge fairness you would need to know what share of total income this group earns, what other taxes they and others pay, and what people think fairness means.
A tax is ‘progressive’ if people with higher incomes pay a bigger share of their income. Is VAT progressive? Use an example.
Answer. VAT is usually regressive: people on lower incomes spend most of what they earn, so VAT takes a bigger share of their income than of a high earner’s, who can save more. Zero rates on food and children’s clothes soften this.
Suggest one tax the government could raise and one it could cut. For each, say who gains and who loses.
Answer. Open question. A good answer names who pays, what behaviour might change, and a trade-off. Check the answer uses the figures above to say how much money is at stake.
Ideas for discussion
- Should people pay more tax when they earn more, or the same amount? Why?
- Which tax would you find easiest to avoid, and what should a government do about it?
- If a tax rises, who really pays it: the person it is aimed at or someone else?
Answer sheet: Tax
Find. Income tax: £326.9bn. Next was national insurance (£200.8bn).
Find. Income tax (£327bn), National Insurance (£201bn), VAT (£180bn), Corporation tax (£95bn), Fuel duty (£25bn).
Explain. Examples with VAT: clothes for adults, most electronics, restaurant meals. Usually no VAT: most food from shops, children’s clothes, books, public transport fares.
Calculate. 179.9 billion ÷ 69.5 million = about £2,589 each. (Companies and the government also pay VAT, so this is an average, not a bill.)
Calculate. 326.9 ÷ 937.8 × 100 = 34.9%.
Calculate. Income tax, National Insurance, VAT: 707.6 ÷ 937.8 = 75%.
Calculate. (326.9 − 302.8) ÷ 302.8 × 100 = +8.0%.
Explain. Pay rises push more income into taxable bands; more people are working; allowances and thresholds that stay frozen pull more of people’s pay into tax (‘fiscal drag’); profits and bonuses can rise.
Find. More: 21.0 billion more than VAT (£179.9bn).
Calculate. 3.1% of taxpayers pay 40% of income tax (£131bn of £329bn). (HMRC estimate for the year, from a survey.)
Judge. It does not decide it by itself. It shows the tax is progressive (higher incomes pay a higher rate). To judge fairness you would need to know what share of total income this group earns, what other taxes they and others pay, and what people think fairness means.
Explain. VAT is usually regressive: people on lower incomes spend most of what they earn, so VAT takes a bigger share of their income than of a high earner’s, who can save more. Zero rates on food and children’s clothes soften this.
Discuss. Open question. A good answer names who pays, what behaviour might change, and a trade-off. Check the answer uses the figures above to say how much money is at stake.
Sources: HMRC (Tax receipts and National Insurance contributions), HM Treasury. See also: Where does my tax go? · Tax receipts · Government finances.