Sam Bailey: “Tax freedom day” comes later in the year than ever and it doesn’t look like getting better

Sam Bailey is a research analyst at the Adam Smith Institute.

Imagine working from January 1st until June 11th and not seeing a single penny for yourself.

That’s the grim reality for the average British taxpayer in 2025, according to the Adam Smith Institute’s latest Tax Freedom Day report. This year, it falls on June 12th – 162 days into the year, six days later than last year, and 21 days later than before the pandemic. By 2028, it’s set to fall on June 24th, the latest in UK history.

It’s a bleak realisation that the British State managed to fight the Nazis with a smaller proportion of our country’s economy, than currently is being spent on our crumbling services.

Despite repeated promises of tax cuts, the burden continues to rise. Why? Because the British State can’t seem to resist the urge to spend – and you can’t cut taxes without first addressing the size of government.

Over half of all government spending now goes on just three things: health, pensions, and welfare. According to the OBR, pensions and health spending alone are projected to account for nearly 18 per cent of GDP by the end of the decade. Add debt interest, and there is precious little room for manoeuvre. Without confronting the structural drivers of this spending, many of them baked in by demographic reality, any talk of serious tax reform is just noise.

There are some low-hanging fruit in the tax code that could be tackled immediately. Inheritance tax is a deeply unpopular and inefficient levy that raises just over £7 billion a year – roughly 0.3 per cent of GDP.

Scrap it.

Or take the absurd marginal tax rate spike at £100,000 income, where personal allowance withdrawal pushes effective tax rates above 60 per cent. It punishes ambition and deters skilled professionals staying in the UK.

But we also need a bit more honesty in the tax debate. The top one per cent of earners now pay 28.2 per cent of all income tax.

The top 10 per cent pay over 60 per cent. Britain has quietly become one of the most progressive tax systems in the developed world. That might be morally satisfying to some, but it’s not sustainable. High earners are mobile, and many are already leaving. The Adam Smith Institute predicts the UK is on track to lose more millionaires than any other country in the world during this parliament.

If we want to get the British economy onto a sustainable path, it will require significant cuts to the size and scope of government and that means making uncomfortable decisions. Reforming welfare and pensions, tackling waste across the public sector, and confronting the mounting cost of debt interest must all be part of the conversation. If politicians are serious about growth, they’ll need to embrace long-overdue supply-side reforms: from fixing our broken planning system to cutting red tape and encouraging business investment.

The public isn’t blind. They know something is broken. When working half the year just covers taxes and the services you receive in return feel worse than ever, it breeds resentment and cynicism. But this also presents an opportunity – particularly for the Conservative Party.

If it has the courage to rediscover its purpose, it can show the country that there is an alternative to managed decline: a smaller, more efficient state, lower and simpler taxes, and a pro-growth, pro-enterprise vision for the future.

Voters are ready for a government that lets them keep more of what they earn – and if the Conservatives don’t make that case, someone else eventually will.