You may have seen last year at this time we wrote this blog about ‘tax freedom day’. This year, in the light of steeply rising energy prices, National Insurance increases, and tax changes not keeping up with inflation levels that we have not been seen for a generation – things have changed a little.
The figures for 2022 are not published until later this year, but we can expect tax freedom day to be even later this year, probably into June. So, let’s start with a reminder – what is Tax Freedom Day? Every year, the Adam Smith Institute calculates the number of days the ‘average’ person would have to work just to pay off their taxes in the UK.
Here are some key highlights from their report for 2021:
Every individual will have a different Tax Freedom Day. In theory it will come later for high-earners and earlier for low-earners and the unemployed. In practice, this isn’t necessarily true because HMRC does not simply tax income but also taxes consumption, investment and ‘sin’ activities at different rates. This includes indirect taxes (such as VAT, fuel duty, council tax) as well as direct taxes (Income Tax and National Insurance).
Interestingly, Tax Freedom Day has trended later each year since 1995, nearly creeping into June in 2021, and very likely to do so for 2022.
There are a few things that everyone can do to move their Tax Freedom Day legitimately. Making sure your assets and liabilities are in the right:
Tax shelter (using allowances and reliefs to ensure you do not lose money unnecessarily to HMRC)
How we can help
Legally and ethically, you can move that day, and if you need professional help with this, then please let us know.
Tax Freedom Day is not meant as anything other than an illustration and thought provoker – it really brought home to the pain of taxation and how you can help address it. I hope this helped you also.
For more information see: https://www.adamsmith.org/taxfreedomday#:~:text=This%20year%2C%20every%20penny%20the,keep%20every%20penny%20they%20earn
