It's tax freedom day: get your finances in order
UK taxpayers have today worked enough since 1 January 2016 to effectively clear their annual tax bill and start earning for themselves.
The 154 days it has taken to pay off tax bills – as an average across all UK tax rates - is four days later than 2015’s ‘tax freedom day’, although it’s still a way off figures from 1980-1985, when tax freedom day didn’t come about until mid-June.
But while tax freedom day is effectively meaningless - you still need to pay your taxes - it is a timely reminder to get your personal finances in order, especially your pension.
Steve Lowe, director at Just Retirement says: “In the first twelve months of the new [pension freedom] rules HM Treasury received a £900m windfall, £200m more than it had planned for, as people rushed to exercise their new freedoms and were hit with a bigger tax bill than expected.
“Yet with just a little planning unnecessary tax bills can be avoided by spreading out withdrawals. People should speak to the government’s free and impartial guidance service Pension Wise to find out more about how to get the most from their pension savings, it might save you money.”
- For more info on pensions and PensionWise see Pension freedoms: what's happened since April? and My PensionWise experience.
Many are also not making the most of their tax free allowances, see Eight easy ways to boost your income.
An unexpected one-off financial gain in cash or shares, generally when mutual building societies convert to stock market-quoted banks. Also windfall tax, a one-off tax imposed by government. The UK government applied such a measure in the Budget of July 1997 on the profits of privatised utilities companies.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.