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Introduction Government intervention, alters the incomes of households by collect taxes and provide benefits to the society. Taxation in general would reduce the levels of household income. This essay will examine the impacts of direct taxes and indirect taxes on the different level of household income levels in the UK Type of taxation in UK Taxation can be classified into direct taxes and indirect taxes. Direct taxes are related to wages, profits earned, value of property, pensions income etc. while indirect taxes are related to goods and services transaction. In UK, the main components of direct taxes are income tax, national insurance contribution and council tax. On the other hand, value added tax, duty on certain goods such as alcohol, tobacco, oils and vehicle excise duty contribute to indirect tax. Diagram 1 below examines how taxes are subtracted from the private income of households. Basically, government collect direct taxes from gross income, which including...

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