An Assessment of Income Tax in the UK and Its Impact on the Purchasing Power of the Individual - Research Paper Example

In fact, taxes and daily life in the UK have been synonymous for centuries. This issues in the United Kingdom has become so thorny in recent decades perhaps because it affects nearly everyone in the country, at any end of the financial spectrum. Taxation can be viewed as a topic that can be regarded as directly and indirectly affecting the economic behavior of consumer, individuals, producers, workers, and investors within the economy of any nation.  In essence, taxation does impact the overall purchasing power of the individual, which corresponds to the economic output of an entire country.

Recent years have seen numerous studies be conducted to demonstrate the correlation between levels of taxation and the national output in select countries. An example of this can be seen in the fact the the Organisation for Economic Corporation and Development (OECD) has recently indicated that a mere reduction of 1% in the rate of taxation in any given economy can produce an increase of 0.6-0.7% in terms of the output of every working person resident within that economy (OECD, 2000). As a result, it is important to consider existing levels of taxation as they related to the potential overall effects, both negative and positive, that is being felt by the average UK consumer.

To While tax free allowances have been around for a long time, It is a result of recent government policy in the United Kingdom that the nation recently pursued the idea higher tax free allowances since 2010, and this is expected to continue until at 2015 until the minimum standard tax free allowance of 10,000 pounds per taxpayer is reached. As a result, there are a number of issues that need to be resolved, and which form the basis for this particular study.