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Tax freedom day – how much of your income do you lose to tax?

By Paul Montague, Partner, Blevins Franks

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How long does it take to earn money for yourself instead of the taxman? “Tax freedom day” varies greatly by country, but good tax planning can help reduce your tax burden, wherever you live.


If you ever had the feeling that you have spent half your working life just paying tax, you are not far wrong. What with income tax, national insurance/social security, capital gains tax, VAT, council tax, excise duties and so on, a considerable amount of our income goes straight to the taxman each year.


Even if you are retired, you are still faced with tax on savings, investments and pensions, not to mention the amount payable in VAT each year. Having paid so many taxes all your life, you will not want to pay more than necessary – that’s why tax planning plays such an important part in protecting your wealth.


Defining the tax burden of typical workers in the EU


For the last 14 years, the Institut Economique Molinari has been comparing the taxes payable by the average wage earner across the 28 EU member states (now EU plus the UK), measuring how many work days of each year are devoted to paying taxes. While it focuses on wages and the tax and social security employees pay, it illustrates the general tax burden of each country and how they compare to each other.


The study calculates a “tax liberation day” for each country – the date on which an employee has earned enough to pay off all taxes for the year. It also identifies the average “real tax rate” for typical workers in each country (gross salary minus all tax liabilities).


2023’s report reveals the average tax freedom day across the EU was 10 June, a day earlier than last year. Cyprus had the earliest date with 16 April, while France resumed its position as the country with the latest tax freedom day on 17 July.


How did Spain fare?


According to the study, Spain’s tax freedom day fell on 8 June 2023, one day later than the previous year, placing it twelfth in the rankings. This means that Spanish employees worked for 159 days of the year just to pay their tax bill.


The average gross salary in Spain is €34,989, but after the real tax rate of 43.4%, workers in the country are only left with €19,792 to spend on themselves and their families.


What about the UK?


According to this study, the UK’s tax freedom day came as low as third, landing on 9 May, with a real tax rate of 35.2%.


However, many think tanks undertake their own research to calculate their country’s tax freedom day, using different methodologies. While the Institut Economique Molinari looks at income tax, social security contributions and VAT, the UK’s Adam Smith Institute (ASI) measures the entire tax take, including taxes that do not come directly out of the earner’s pocket.


The ASI’s approach places the UK’s 2023 date more a month later, on 18 June. This is 10 days later than in 2022, which itself was a week later than in 2021. It’s the latest date since reliable records began in 1995 (or since the mid-eighties looking at earlier but less reliable data).


The Adam Smith Institute expects the UK’s tax freedom day to continue to fall later in the year and to hit 23 June in 2025, the latest since the early 1960s according to historical data.


How much tax did you pay in 2023?


Of course, the research is just indicative of the average taxpayer in each country – higher earners will generally have a later tax freedom day, though if you are retired then you don’t have to worry about social/national insurance contributions.

Every taxpayer is different, but if you felt you paid too much tax in 2023 now is the time to take action to see if you can mitigate your liabilities in 2024.


In many cases, there are steps you can take to lighten your tax burden, especially on your capital investments and pensions. While we all have to pay our share of taxes, cross-border taxation is highly complex; do not risk getting it wrong or paying more than you have to. Take personalised, specialist advice on the compliant tax mitigation opportunities available in Spain and the UK – you may be surprised at how you can improve your tax situation.


Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.

Blevins Franks Wealth Management Limited (BFWML) is authorised and regulated by the Malta Financial Services Authority, registered number C 92917. Authorised to conduct investment services under the Investment Services Act and authorised to carry out insurance intermediary activities under the Insurance Distribution Act. Where advice is provided outside of Malta via the Insurance Distribution Directive or the Markets in Financial Instruments Directive II, the applicable regulatory system differs in some respects from that of Malta. BFWML also provides taxation advice; its tax advisers are fully qualified tax specialists. Blevins Franks Trustees Limited is authorised and regulated by the Malta Financial Services Authority for the administration of trusts, retirement schemes and companies. This promotion has been approved and issued by BFWML.

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