It's finally Tax Freedom Day - the date has slid into June

Updated
burning money
burning money



Tax Freedom Day is finally here, and after 154 days of working for the taxman, we can finally start earning money for ourselves. There will be plenty of people who are shocked at how late it falls this year - four days later than in 2015 - especially when the government made so many promises that taxes wouldn't go up after the 2015 election.

The date is calculated each year by the Adam Smith Institute - which says that this year around 42.27% of everything the country makes will be paid in tax. It takes into account everything from income tax and national insurance to VAT and corporation tax.

The institute is concerned that this is the first time in 15 years that Tax Freedom Day as edged into June - which could be a sign we are moving in the kind of direction that could prove expensive.

Director of the Adam Smith Institute, Dr Eamonn Butler, said: "The Treasury hates Tax Freedom Day because they don't want us to know how much tax we really pay. They conceal the tax burden with stealth taxes that we don't even realise we're paying. But it's shocking that the government takes over two-fifths of the country's earnings – and then borrows more. We work longer for the government than mediaeval serfs had to work for their Lords."

What should be done?

It argues that the threshold of National Insurance Contributions should rise from £8,060 to £11,000 - the same level as income tax. It says that both should then be pegged to the annual salary of a full-time minimum wage worker, so low earners pay no tax on their earnings. Butler added: "It is absurd that people on the minimum wage are liable for National Insurance Contributions, which raise their cost to employers and make it harder to move from benefits into work. The poor are also worst hit by regressive taxes like excise duties on what they buy."

What about you?

The institute does its calculations based on the total tax the government takes, versus the national net income - and expresses it as a percentage of the year. It's a fairly blunt tool, designed to highlight the burden of taxation. The figures are necessary distorted by the fact that corporation tax is included in the mix - which is paid by companies rather than individuals.

In reality, your Tax Freedom Day will be a bit different. It will depend on a huge range of things, from how much you earn, to how much money you tend to spend, how much driving you do, what you smoke or drink, the holidays you take, and the insurance you buy.

As a very rough rule of thumb, a low earner can expect their personal Tax Freedom Day to fall some time in April, while a middle earner can expect theirs to fall sometime in May, and a higher earner in early June.

Of course, all of us can nudge our Tax Freedom Day a little earlier in the year, by taking advantage of tax-efficient schemes. This may mean putting more money into a pension, taking advantage of salary sacrifice arrangements in order to receive a proportion of our pay as tax-free childcare vouchers, saving tax-efficiently or shopping around to spend less on the kinds of items that attract VAT.

It may not drag our Tax Freedom Day back by much more than a few days, but it might mean we can score a better deal than those mediaeval serfs.

            Trafalgar Square turned into a 'Tropical Tax Haven'
Trafalgar Square turned into a 'Tropical Tax Haven'


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