Tax freedom day: What you can do to get there quicker

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Tax freedom day: What you can do to get there quicker
Tax freedom day: What you can do to get there quicker



Sunday 31st May marks Tax Freedom Day, according to the Adam Smith Institute, the date when the average taxpayer will have earned enough money to cover all of their taxes for the year

It has taken an average of 150 days for workers to cover their taxes, including National Insurance, VAT, fuel duty and others, in 2015. That's one day more than in 2014. Of course this is only a theoretical day in reality. However, it's a useful way to demonstrate just how long you need to work in order to cover your tax expenditure for the year.

Here's when Tax Freedom Day has fallen, according to the Institute's calculations, over recent years:

Year

Tax Freedom Day

2015

31st May

2014

30th May

2013

29th May

2012

28th May

2011

27th May

2010

25th May

2009

25th May

2008

31st May

2007

30th May

2006

31st May


How to get there earlier

These figures are just an average. There are plenty of things you can do to legitimately cut the amount you pay in tax each year, and therefore hit your own personal Tax Freedom Day a little bit earlier.

According to the TaxAction report from Prudential and Unbiased, as a nation we are spending a vast £4.9 billion a year more in tax than we need to. That's because of a host of tax breaks that are simply going unused.

Pension tax relief

More than four million adults in the UK aren't saving into a pension and so aren't making use of the tax relief on offer from the Government. According to the report, that's a total of £2.9 billion being wasted each year.

ISAs

A whopping 55 million UK bank account holders will waste a combined total of over £1.3 billion by not moving their spare cash into an ISA.

If you want to enjoy some tax-free returns on your savings, check out The best Cash ISAs for the 2015/16 tax year.

Inheritance Tax

As for Inheritance Tax, around £550 million is wasted by people who don't place their life insurance policies 'under trust'. By writing your policy in trust, the payout when you die is not classed as part of your estate, so won't be subject to Inheritance Tax.

For more read Over 90% of life insurance policies may be subject to Inheritance Tax.

Get a life insurance quote

Capital Gains Tax

There was £158 million paid in unnecessary Capital Gains Tax this year, the report suggests, mainly because savers weren't using ISAs to shelter investments from tax liabilities.

The current Capital Gains Tax allowance stands at £11,000. Anything above is charged at 18% for lower and 28% for higher rate taxpayers.

For more ways to ensure you are only paying as much tax as you should, take a look at our guides below.

Compare Cash ISAs with loveMONEY

More on tax:

How to check you're on the right tax code

How to slash your Council Tax bill

How to get a tax refund

How to cut your Inheritance Tax bill

Internet Tax Freedom Act Explained - TurboTax Tax Tips Video
Internet Tax Freedom Act Explained - TurboTax Tax Tips Video