Tax Freedom Day answers the very basic question: ‘how much are Britons actually paying for government?’ It is the day when average Britons stop working for the Chancellor and start working for themselves.
When is Tax Freedom Day in 2014?
This year tax freedom day falls on 28th May. That is, for 148 days of the year every penny earned by Britons will be taken by the government in tax.
How is it calculated?
It is calculated by comparing general government tax revenue with Net National Income (NNI). The total of all government tax revenue – direct and indirect taxes, local taxes and National Insurance contributions – is calculated as a percentage of NNI at market prices. This year it comes to 41.09%. That percentage is then converted to days of the year, starting from 1 January. The first day of the year that Britons work for themselves rather than the taxman is Tax Freedom Day.
When has it fallen in the past?
It has varied quite significantly over the past few decades. In the 1970s it tended to fall in late May, before rising to the latest date on record in 1981 (20th June). It fell throughout the 1980s to a low of 20th May in 1993 before rising again to a 24 year high of 3rd June in 2001. Tax Freedom Day over the last ten years:
28 May (29th ex. leap year)
Why is it earlier than last year?
Tax Freedom Day falls three days earlier than it did in 2013. Because of updates to the Treasury's figues, Tax Freedom Day 2013 is now revised to 31st May. This change is not statistically significant.
Cost of Government Day 2014 — the day the government stops spending money — will be 26th June. In 2013, it was 2nd July.
We assume the government gets its forecasts right and that financial year growth of revenues, GDP and expenditure are equivalent to calendar year. We assume that GNI grows at the same pace as GDP and that NNI is unchanged relative to GNI.