Brits to spend half a year waiting for Tax Freedom Day after Labour tax hikes
Tax Freedom Day is set to be on the latest ever date within a matter of years, fresh research has revealed, with Chancellor Rachel Reeves showing no signs of cutting taxes in the near future, given inflated spending.
Reeves unveiled billions more cash to be injected into several departments at yesterday’s Spending Review while funding commitments for some policies, such as a U-turn on winter fuel payments, have not been laid out.
But research by the Adam Smith Institute (ASI), released on this year’s Tax Freedom Day, has revealed that the absence of further tax cuts will push back the day at which Britons are free from paying into government coffers.
Analysis of public finances data revealed that the length of time the average worker will have paid off taxes for the year will come after 174 days by 2028, compared to 162 days this year, if tax cuts are not made by Reeves in the upcoming Budgets.
Tax Freedom Day in 2030 could come after the year’s halfway mark has been passed, a trend which ASI chair James Lawson put down to the government “swallowing more than half of national income” through taxes.
Writing for City PM, Lawson warned the government not to tax its “way out of stagnation” as he claimed the Spending Review “doubled down on the mistakes of the past”.
“Britain risks sleepwalking into a third lost decade of stagnation and unsustainable debt. We cannot borrow our way to prosperity, nor can we keep pretending that an ever-expanding state will somehow fix the country’s underlying problems.”
Richest Brits paying more tax
ASI researchers also pointed out that the top five per cent of taxpayers paid nearly half of all liabilities this year, a steady increase from the last 25 years.
Tax receipts may also come in lower than expected if predictions by the ASI and the Centre for Economics and Business Research (CEBR), which said the government could see a shortfall of £12.2bn if half of former UK non-doms left by 2030 due to Reeves’ policy changes, come to light.
But Reeves appears unlikely to row back on recent tax hikes, including a £20bn increase to employers’ national insurance contributions (NICs) and higher capital gains taxes, due to the precarious state of public finances.
The Chancellor left herself a fiscal buffer worth around £9.9bn at March’s Spring Statement, which could risk getting wiped out by October if gilt yields continue on their upward trajectory, economic growth stalls and spending cuts fail to be made.
Economists across the City and at think tanks such as the Institute for Fiscal Studies (IFS) have suggested Reeves could extend a freeze to income tax thresholds to raise income, otherwise dubbed a “stealth tax” that could drag millions into higher income thresholds.
Shadow business secretary Andrew Griffith blamed successive governments for failing to be honest with the electorate about tax and spending policies.
“Britain is now spending 163 days a year slaving away for this high spending socialist government – far too long,” he said.
“Tax Freedom Day comes later every year because for too long politicians have not been honest about living within our means.”
“We need to cut spending to give Britain room to grow.”