Page last updated at 11:22 GMT, Thursday, 14 May 2009 12:22 UK

Shorter wait for tax freedom day

Clock and files
It takes time to work long enough to cover the tax burden

Workers in the UK have to work until 14 May to cover all of the tax they must pay in 2009, says a think tank.

This is a shorter wait than last year, when the so-called "tax freedom day" arrived on 22 May, the Adam Smith Institute said.

The average worker must work 134 days in 2009 to earn the money going to the government through income tax, National Insurance, VAT and other taxes.

But factoring in government borrowing extends that period to 176 days.

Recovery

"Running up deficits can be described as a form of deferred taxation," said Gabriel Stein, chief economist at Lombard Street Research who carries out the calculation.

"The effect will be that when the economy recovers - as it will eventually do - the UK tax burden is likely to rise much faster than would otherwise have been the case and tax freedom day is likely to creep later and later in the year."

The calculation also includes outlays such as fuel, alcohol and cigarette duties, car tax, and council tax.

Excluding government borrowing, the day falls earlier than at any time since 1973.

Business failures and rising unemployment means that the government is unable to bring in as much tax revenue, prompting greater borrowing.

The Institute said that the gap between tax freedom day based on actual revenues - 14 May - and tax freedom day based on government spending - 25 June - was the widest it had been since the early 1970s.

The 25 June date was also the latest since 1984.



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