Exact date working Brits will stop 'paying HMRC tax'

Britons are now handing over every penny they earn to the taxman for almost half the year – with the point at which they start earning for themselves delayed until this Thursday, June 12.

The so-called “Tax Freedom Day” marks the moment when workers theoretically stop working for HMRC and start keeping their earnings. But this year it has slipped dramatically – falling a full three weeks later than in 2022.

According to the Adam Smith Institute, which calculates the date annually, the shift is a stark indicator of the soaring tax burden. In 2021, Tax Freedom Day fell on May 24. Last year, it was June 8. This year, it’s four days later again.

Much of the increase is down to stealth taxes, according to Sarah Coles, head of personal finance at Hargreaves Lansdown. She said: "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.”

Government data shows just how much more people are forking over.

“In 2024/25, there were 37.7 million taxpayers, and we handed over an eye-watering £301.9 billion in income tax – up 10% in a year and up 37% since 2021/22,” she said.

“The pain is far from over, because these thresholds are frozen until 2028.”

And the tax grab doesn’t stop there. Even before this week’s Spending Review – expected to contain further hidden hits to taxpayers – families and investors are already being squeezed.

“Investors have also been clobbered by the cutting of the dividend tax allowance from £2,000 to £500, and the hiking of the rate – plus the cutting of the capital gains tax allowance from £12,300 to £3,000, and the introduction of higher rates on gains from stocks and shares,” said Coles.

For those desperate to claw back some control, Coles offered tips to soften the blow – from pension trickery to smart use of ISAs.

Income tax

She said: “There are several ways to tackle an income tax bill.

You have a pension allowance each tax year of up to £60,000, so it’s worth considering whether you can pay in more, and reap the tax benefits.”

Contributions attract relief at your highest rate, and the first 25% you withdraw is typically tax-free.

Salary sacrifice schemes can also help – swapping part of your wage for pension contributions means you avoid both income tax and national insurance on that slice.

Savings and investments

ISAs are one of the most effective shields from the taxman. Interest and dividends earned inside them are tax-free.

“There are also a limited number of products that are tax free, the most popular of which is premium bonds,” said Coles. “You won’t receive any interest... but if you win a prize of any size, you won’t pay any tax on it.”

Capital Gains and Dividend Tax

“Investors can protect themselves from dividend tax and capital gains tax by selling assets (trying to keep gains within the capital gains tax allowance of £3,000), and then using the Bed & ISA process to move up to £20,000 into an ISA,” she explained.

Prioritise holding income-producing assets inside an ISA to avoid higher rates on dividends.

Family fortunes

Married couples and civil partners can transfer assets between them tax-free to spread allowances.

“You could hand over enough assets for you both to realise gains within your CGT allowances, receive dividends within your dividend allowance, and take advantage of both your ISA allowances each year,” said Coles.

Those saving for their first home or retirement should consider a Lifetime ISA. Up to £4,000 a year can be invested – and the Government will add another 25%.

Parents can also set up Junior ISAs or pensions to pass on tax advantages to the next generation.