The UK’s tax burden keep rising, upsetting lots of people. In the 2026/27 tax year, the total tax take will reach 37% of gross domestic product (national output). And with tax thresholds frozen, almost two-thirds (66%) of all adults could pay income tax in 2028/29.
Dodging tax
Benjamin Franklin, one of the US founding fathers, remarked, “In this world, nothing can be said to be certain, except death and taxes”. Economist John Maynard Keynes later added, “The avoidance of taxes is the only intellectual pursuit that still carries any reward”.
No-one need pay a penny more in tax than due. While unlawfully avoiding payment is tax evasion, tax avoidance — minimising one’s tax bill — is perfectly legal (and highly lucrative).
Top tax rates
I believe that no government should take more than half of any citizen’s money in taxes. A 50% tax limit shares the spoils evenly between individuals and states. Yet HM Treasury charges some tax rates that I think are wildly unfair, including these three.
1. Cigarette-packet racket
Despite being a smoker, I regard tobacco as a harmful, addictive product that should be phased out. When I buy 20 cigarettes, I pay three ‘hidden’ taxes: £7.07 duty on each pack, plus 16.5% of the base price, plus value added tax (VAT) of 20% on top.
Together, these three taxes total nearly five-sixths (83%) of the price of 20 cigs. Wow. Thus, a duty-paid packet costing £15 consists of a base cost of £2.50 and taxes of £12.50. Moreover, this unfair deal will keep getting worse, due to future ‘escalator’ tax rates. No wonder cigarette smuggling and counterfeiting is booming.
2. Fooled by fuel
Currently, fuel duty is 52.95p per litre of unleaded petrol or diesel, plus VAT on top. With fuel prices soaring during the US/Iran war, HM Treasury will collect billions of pounds in extra duty. Perhaps these rates should be cut to ease costs for struggling British motorists?
3. Income-tax traps
In a 3 April article, I explained how British workers earning between £100,000 and £125,140 pay an effective tax rate of 62% on these earnings. This affects perhaps 1.9m British workers — including doctors working fewer hours to avoid this punitive charge. Yet this ‘tax trap’ can be dodged through salary sacrifice and extra pension contributions.
ISA, I say!
The UK’s most popular tax shelters are pensions and ISAs (Individual Savings Accounts). Most British adults have some pension provision, while 15m people open ISAs each year. My wife and I use both to minimise our tax bills.
For example, we own shares in Standard Life (LSE: SDLF), formerly known as Phoenix Group Holdings. This FTSE 100 firm is the UK’s leading provider of long-term savings and investment plans. At the current share price of 745.4p, this group’s market value is £7.5bn.
We own this Footsie stock for its market-beating dividend yield, currently 7.4% a year. Though future dividends are not guaranteed, they have risen steadily, reaching 55.4p for 2025. Owning this share inside ISAs means no extra tax on dividends, plus no capital gains tax on future profits from selling.
This month, Standard Life agreed to buy rival Aegon UK for £2bn in cash and shares, gaining 3.7m customers. If this deal goes awry, then it could well hit future revenues, earnings, and cash flow. Even so, I’m hoping Standard’s success continues!
