Tax Freedom Day
Tax Freedom Day shows just how long we spend working for the Treasury, rather than ourselves. Overall, the government takes more than 40% of national income. This means that the average UK resident has to work a full five months of the year solely to pay that tax bill. Last year, that meant working from 1 January to 4 June – just to pay taxes!
And that’s the average UK resident – assuming there are a significant number of dentists reading this column that are higher rate tax payers, there’s a fairly high chance that you currently spend more time working for the Treasury than yourself.
The 2008 Budget did little to change that. Assuming the Chancellor got his growth forecasts right, Tax Freedom Day 2008 will fall on June 2. And if you take government borrowing into account, Tax Freedom Day does not come until 14 June.
For much of the last few years, however, Tax Freedom Day has been coming later and later. In fact, it falls a full week later now than it did back in 2002. That is an extra week of working for the Chancellor.
Tax Freedom Day is calculated by taking the UK's net national income and calculating how much of that is taken away in taxes. These taxes include not just income tax, but VAT, inheritance tax, stamp duty, car and fuel taxes, excise taxes on alcohol and cigarettes, taxes on companies and employment, and many more.
Another worrying issue is that as there is a general move towards tax harmonisation in the single currency area and with taxes among the fifteen euro members generally considerably higher than in Britain, such moves must mean a substantial increase in the British tax burden over and above what is already being planned.
So if you’d rather be working for yourself than the Treasury make the most of all the tax breaks available: Individual Savings Accounts, Pensions, Estate planning, Life Insurance policies in trust, Wills, equalisation of assets, childcare vouchers, income drawdown, annual Capital Gains Tax exemption, offshore investment planning, Venture Capital Trusts, Enterprise Investment Schemes, offset mortgages to name just a few.
If that all seems too much work, find a specialist accountant and IFA and they can help you reduce your tax bill which means you can spend more time working for yourself and less time working for the Government.
PDF