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Tax break plea as Tax Freedom Day nears

Tax break plea as Tax Freedom Day nears

Category: Money

Updated: 27/05/2011
First Published: 27/05/2011

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Workers have been told to make the most of the tax breaks available to them as the day nears when people stop working for the Government and start working for themselves.

Monday 30 May is the day that the Adam Smith Institute has this year calculated as being Tax Freedom Day – the think tank has worked out that every penny earned in the UK between January 1 and May 29 will be taken by the taxman.

Incredibly, people are now working an additional five weeks for the Government compared with in the mid-1960s.

And to further highlight the tax burden currently faced by UK tax payers, Fidelity International has figured out how much of an employee's earnings are likely to go to the taxman each and every day.

Taking VAT and National Insurance contributions into account, it found a basic rate taxpayer now faces a marginal rate of tax of 43% on each new pound they earn and spend.

This means that for every day a basic rate taxpayer works, they do not start earning any money for themselves until just past one o'clock in the afternoon.

For higher rate taxpayers, only the money they earn after 1.45pm actually goes into their own pocket, rather than that of the taxman.

With such a significant proportion of earnings already being lost to Government coffers, people are being urged to make the very most of the tax breaks that are on offer.

Making full use of the ISA allowance is a must for savers who can currently shield £10,680 from the taxman every tax year.

Meanwhile, setting up a pension means people will benefit from tax relief on their contributions, while helping to plan for their retirement too.

"In today's high tax environment it is more important than ever before for people to make sure they take advantage of every tax break available to them," said Tom Stevenson, investment director at Fidelity International.

"If you haven't already done so, Tax Freedom Day is a great time to open an ISA and protect more of your hard earned cash from the taxman."

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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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