Christmas is a time for enjoyment with friends and family. Yet the holiday season is often also accompanied by additional pressure on household finances, as individuals plan to spend more than £650 on gift giving and making merry this Christmas. With the overall tax burden set to rise to record levels,[1] a significant proportion of this sum will be paid in taxes. Though it is the season of giving, the government is set to take even more from the nation’s households compared to most months. Using information collected by Nationwide,[2] this note examines how much tax an average person will pay on their spending at Christmas.
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Key findings
- A two person household will pay £184 in taxes on their Christmas spending, equivalent to the cost of six turkeys from Tesco – enough for 75 servings.[3]
- This includes the £92 an average person will pay in tax on Christmas expenditures comprising:
- £42 in VAT on presents
- £18 in VAT on entertainment
- £32 in VAT and alcohol duty on alcohol
- If they travel by car to visit friends and family over the holiday period, households will pay an additional £11 in VAT and fuel duty, bringing the total to £195.
- If their festive plans also include a flight abroad to a nearby European destination, they will pay an additional £13 in air passenger duty per person, bringing the total to £221.
- In total, it is estimated that the government will collect £5.3 billion in taxes on Christmas related spending and activities this year, slightly over half what is needed to pay for the £9.4 billion public sector pay rise announced earlier this year.[4]
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[1] TaxPayers’ Alliance, TaxPayers’ Alliance forecasts £30 billion hit to UK economy due to budget, 30 October 2024, www.taxpayersalliance.com/taxpayers_alliance_forecasts_30_billion_hit_to_uk_economy_due_to_budget, (accessed 5 December 2024).
[2] Nationwide, Minted On Vinted: 1 In 3 Brits Heading To Online Marketplaces To Make Money Ahead Of Christmas, 2 December 2024, www.nationwidemediacentre.co.uk/news/minted-on-vinted-1-in-3-brits-heading-to-online-marketplaces-to-make-money-ahead-of-christmas, (accessed 5 December 2024).
[3] Tesco, 20. Tesco whole turkey medium 4.5kg – 5.99kg (serves 11-14) - £29.95, www.tesco.com/groceries/en-GB/products/255865979, (accessed 5 December 2024).
[4] Reuters, UK public sector workers get above-inflation pay rises, worth 9 billion pounds, 29 July 2024, www.reuters.com/world/uk/uk-public-sector-workers-get-above-inflation-pay-rises-worth-9-billion-pounds-2024-07-29/, (accessed 5 December 2024).