According to the Adam Smith Institute, “Tax Freedom Day” this year was 31 May 2021.
This is the latest point in the year since reliable records on the statistic have been compiled (i.e. since 1995).
Tax Freedom Day is the Institute’s best effort to assess when, in a given calendar year, the “average” citizen might be said to have worked exclusively to pay all their tax obligations, and after which the money they earn is their own.
In practice this is a relatively crude averaging of individuals’ very widely differing circumstances, and a complicated assessment involving the attribution of “indirect” tax obligations (like Corporation Tax borne by companies) to individuals who ultimately must be said to suffer it, on top of admittedly variable economic projections for the remainder of the year.
Nevertheless, the Tax Freedom Day statistic, couched in terms of the number of days in a year it takes us “on average” to pay all of our tax burden for that year, does give us some sense of the size of the public sector (or at least some sense of our statutory obligation towards paying for our public sector, acknowledging that government very rarely seems to cover its overall cost with tax revenues!).
At 31 May this year, the statistic is surely telling us that 5/12ths of our “national income” (earnings and profits) is now paid in tax. That is 41.66%. This, we understand, continues the upward trend depicted so clearly by the graph below, compiled by the Institute for our understanding (with apparent party political responsibilities applied as well).
How can we help?
If you would like some help or tax advice, please don’t hesitate to get in touch with your relationship principal or with Chris Barrington, Tax Partner.