Tax Freedom Day keeps coming later as fiscal drag bites

Will Drysdale, Senior Reporter, Business & Accountancy Daily

Brits are working longer than ever before the annual Tax Freedom Day comes around, having to put in 162 days of grind before their income becomes their own.

Shockingly, this is three weeks longer than before covid, which was just five years ago, showing how fiscal drag is pulling millions more into higher rates of tax.

The Adam Smith Institute said Tax Freedom was 21 days earlier in late May before the pandemic and back in 2009 Tax Freedom Day fell as early as 18 May.

This year each British taxpayer will have to work six days longer before their earnings become solely their own, meaning the tax burden ‘could be higher than it was during WW2 and the Napoleonic Wars’, according to the Adam Smith Institute.

James Lawson, chair of the Adam Smith Institute, said: ‘Britons are now working nearly half the year just to pay taxes — and the burden is only getting heavier. A tax system that consumes 162 days of our working year is simply not sustainable.

‘It stifles our economic growth, productivity and our long-term prosperity. If we are serious about turning around our stagnant economy, we must start by cutting taxes.’

Up until 11 June every single penny a taxpayer earned effectively went to HMRC and the government.

Sarah Coles, head of personal finance, Hargreaves Lansdown: ‘We spend the best part of six months working for the taxman, and it’s only going to get worse. Tax Freedom Day marks the day when we have earned enough during the year to cover our tax bills, and it has been falling later and later with each passing year.

‘Real pain has come from a horrible stealth tax – the freeze in income tax thresholds, which has pushed millions more people into paying tax – and millions into paying tax at higher levels.

‘In 2024/25, there were 37.7 million taxpayers, and we handed over an eye-watering £301.9bn in income tax – up 10% in a year and up 37% since 2021/22. The pain is far from over, because these thresholds are frozen until 2028.’

The Adam Smith Institute analysed data from the Office for Budget Responsibility (OBR) along with assessing government tax policies to conclude when Tax Freedom Day falls, and predicted when it will fall up until the end of the decade.

By 2030 it believes taxation could surpass 50% of taxpayers’ net income, with Tax Freedom Day not happening until halfway through the year at the end of June.

John O’Connell, chief executive of the Taxpayers Alliance said: ‘It’s staggering that hard-working Brits have to slog through nearly half the year before they’re earning for themselves, not the taxman.

‘Tax Freedom Day keeps drifting later, a damning sign of out-of-control public spending.

‘Ministers can’t keep burying their heads in the sand. It’s time for serious reform to slash waste and deliver better value for taxpayers.’

The Adam Smith Institute also acknowledged that the wealthy are still apaying the most each year, with the wealthiest 1% paying 28.2% of the total tax take in the UK which is leading the UK ‘to lose the greatest proportion of millionaires in the world within this Parliament’, said the Institute.

Saqib Bhatti MP and shadow minister for Culture, Media & Sport, said: ‘I am a Conservative because I believe that people know how to spend their money better than the Government.

‘Keeping taxes down helps drive economic growth, supports dynamic businesses and raises living standards for all. 

‘On Tax Freedom Day, I am calling on the Government to lower taxes to incentivise investment and turn our economy around. Give people their freedom.’

The Adam Smith Institute may have to reassess its predictions after the Autum Budget though as there are more tax hikes predicted from Rachel Reeves to cover government spending.