Take a tip from the government and tax yourself


Tax Time

Tax is a tool for the government to generate revenue and control negative habits, but if we take a tip from the taxman we could also use it to our benefit.

Ask a smoker about the cost of cigarettes and they'll tell you the price is extortionate. Of course the cost of producing, marketing and selling cigarettes hasn't gone up hugely, the tax has (apparently the average pack of 20 cigarettes now costs £8).
In the last Budget, chancellor George Osborne announced tobacco duties would rise 2% above inflation and the duty escalator policy would be continued.

Depending on your take on smoking you might think that this is fair enough, after all if you're a smoker you're more likely to develop heart disease or have a stroke so are bound to be a burden on the NHS. The same could be said of drinkers.

To this extent taxing our vices makes sense for the government as it wins two-fold; not only does it increase revenues but it may also tame our ways – if something is too expensive you'll do it less, you may even stop doing it altogether.

These taxes could be saving us from ourselves (although personally I would like to see obesity tackled in this way as I have written before, a sugar tax would certainly help curb the sales of soft drinks and sweets that aren't doing our health any favours).

When it comes to our personal finances we can also introduce a 'save me from myself' mentality.

It will involve a bit of leg-work at first. You need to write an honest budget detailing all essential spending you have every month or however often you get paid. Then set yourself a 'savings tax' and set up a direct debit to an ISA, or Nisa as they will be from 1 July, or other savings account each month (although remember ISAs are tax-free so max them out first).

Make sure the direct debit goes out as soon as you get paid which means you've already 'taxed' yourself, the money is gone and you have to live on what you have left. Of course you need to be realistic about what you can live on, you don't want to fall into costly debt unnecessarily, but equally you need to be honest about what you don't need to spend your money.

And the best bit of a self-enforced savings tax? You get to choose what you spend the cash on, not the government.