How much tax do you pay each year? Too much is probably your reflex response, but few people actually realise just how high their annual tax bill really is.
It's not just a simple matter of adding income tax and National Insurance (NI); we're taxed far more than that.
Whether you're putting petrol in your car, doing some impulse clothes shopping or even setting money aside for a rainy day, almost every time you open your wallet the government's coffers swell.
When you add it all up, you could be paying one pound to the government for every three you earn.
What are your most hated taxes? Share your thoughts on the forum
Let's start with the basics
Income tax is the biggie for most people and the more you earn the more tax you pay. This can only get worse as the government is keen to squeeze even more income tax out of higher earners.
The top rate of income tax will rise from 40% now to 50% in 2010 for people who earn more than £150,000 a year.
People with annual earnings of more than £100,000 will also be hit by the withdrawal of their personal allowance, the amount of income they can earn tax-free, which is set at £6,475 in the current tax year.
Next year, the personal allowance will be cut by £1 for every £2 of income above £100,000, until it is withdrawn completely for someone with an income of more than £113,000.
The changes could have a noticeable impact. If, for example, you earn £200,000 a year you will currently pay income tax of £69,930. The changes to the tax rate and the personal allowance will boost your bill to about £77,520.
Check you're paying the right amount of tax on your salary
National Insurance on the rise
NI also takes a sizeable bite out of our earnings - and that's on the increase, too.
Employees currently pay 11% on earnings between £5,715 and £43,875 a year. In 2011, the rate will go up by half a percentage point to 11.5%. The rate of NI on earnings above the upper threshold is now 1%, but will rise to 1.5% in 2011.
Away from the pay cheque
It's easy to overlook other taxes, but they can make a big difference to our wealth. If you move house, for example, you could be hit with a hefty bill for stamp duty. Let's say you are buying a house for £200,000.
You would pay stamp duty land tax at 1%, or £2,000. A home with a purchase price of £400,000 would land you with a tax bill of £12,000, while you'd have to hand over £24,000 in tax if you bought a propertyworth £600,000.
The taxman could also grab 40% of any inheritance above the tax-free threshold of £325,000, said Gary Heynes of accountants Baker Tilly. "Don't forget capital gains tax, leviedat a flat rate of 18% on the profit from sales of assets such as shares."
Protect your savings from the taxman with an ISA
Tax, but by another name
Then there are the various duties, which are basically taxes by another name. Motorists will probably be familiar with the tax on cars, the most obvious being vehicle excise duty.
The tax rates for cars registered on or after March 1 2001 were recently split into 13 bands, depending on CO2 emissions. The lower a car's emissions, the lower the vehicle tax - and prices range from £0 to £405 for a 12-month tax disc.
The government also levies duty on petrol, which will go up by 2p a litre in September, following a similar increase in April. It will then rise by 1p a litre above inflation each April for the next four years.
September's increase will bring the total duty on a litre of fuel to 56.19p, out of a typical price at the moment of 103p for a litre of unleaded, according to PetrolPrices.com. If we assume the average car consumes 1,286 litres of petrol a year, that's more than £700 a year in tax.
Sin taxes on the rise - again
What about other duties? The tax on cigarettes and alcohol went up by 2% in the Budget in April, adding 13p to a bottle of spirits, 1p to a pint of beer and 4p to a bottle of wine. It brings the total tax on a bottle of wine to 51% of the retail price.
If you buy a bottle of spirits, 77% of the price will go to the taxman, according to the Wine and Spirit Trade Association.
Smokers are similarly penalised by the tax system. The increase in duty announced in the Budget pushed up the price of a packet of 20 cigarettes by 7p. For a £5 packet of 20 cigarettes, about £4.50 now goes to the government in tax.
Invest on the stock market tax-free with an equity ISA
Travellers beware
Watch out if you go on holiday, too. The government will even tax you when you take off from a UK airport. There are currently four rates of air passenger duty (APD), depending on your destination and the class you travel.
If you head to Europe in economy class, it will cost you £10 in duty. Fly anywhere else and the standard rate is £40.
APD doubles if you fly premium, business or first class, to either £20 or £80. This tax is usually added to the price of the ticket.
The rates of APD will, however, change in November. They will be divided into four bands, according to the number of miles between London and the capital city of the destination country.
It means if you travel to Spain, you will pay duty of £11 in economy class. But if you venture to Australia, it will cost you £55. The rates are again doubled if you select a higher class.
We can look forward to some hefty increase in 2010-11. The Band D price, for example, will jump from £55 to £85.
Yet more taxes
VAT is similar to the various duties because it is a so-called indirect tax. In other words, it is usually implicit in the price of the goods or services, but it can bump up our overall tax bill.
In his pre-Budget report in November 2008, chancellor Alistair Darling cut the VAT rate from 17.5% to 15% in an attempt to stimulate spending. It was a temporary measure, but Darling confirmed in his April Budget that the reduction would remain in force until the end of the year.
The cut has undoubtedly lowered prices in the shops, but not by much as we still pay a chunky 15% VAT.
Some items are exempt from VAT, including food, books and children's clothes. There is also a reduced rate of 5% on domestic power. But if you are a keen shopper, or you like to eat out, VAT will strike your wallet.
See what you pay VAT on
Some good news...
So, do we get any tax breaks? Some families and pensioners on low incomes are entitled to tax credits. The government also uses tax incentives to encourage savings.
Most people can, for example, put up to £7,200 into a tax-free ISA in the current tax year. The limit will rise to £10,200 next year, but with a maximum £5,100 in cash.
There are also tax perks for pension savers. If you are a basic rate taxpayer, the government makes up to £1 every contribution of 80p.
Higher rate taxpayers can claim the extra 20p through their tax return. The relief is generous, but is not going to last for long for some people.
From April 2011, if you earn more than £150,000, higher-rate tax relief on pension contributions will be restricted, until you get only basic-rate relief if you earn £180,000 or more.
In other words, if you are a high-earner and want to pay £100,000 into your pension, it will currently cost you £60,000. In future, the same contribution will cost £80,000, or an extra £20,000.
Sadly, we can probably expect more tax hikes in the future. The economy is in a mess and the government is borrowing colossal amounts of money. If we are ever to get back on track, tax rises seem inevitable.
Are you owed any tax back? Find out free
A practical example
Now that we have run through the various taxes, let's take a look at how this would apply to a specific couple.
Chris King, 34, is a typical MSN Money reader. He's a teacher and earns £30,000 a year. That means he's entitled to a tax-free allowance of £6,475, bringing his taxable income to £23,520. He pays income tax of £4,704 and National Insurance of £2,671, adding up to a total of £7,375.
Chris bought an Audi A4 last year and pays £215 for his road tax. He drives about 1,200 miles a year, so his fuel duty bill adds up to £756. He has been to Spain and to visit relatives in Australia, handing over £50 in air passenger duty.
His wife, Jane (29), is a GP and earns £45,000 a year. If we take off her personal allowance, her taxable income is £38,525. She pays income tax of £7,930, plus National Insurance of £4,209, to give a total bill of £12,139.
Jane recently splashed out £11,000 on a new Volkswagen Polo, which landed her with a VAT bill of £1,435. Her road tax costs £125 a year, she drives 9,000 miles and pays £504 in fuel duty. She also spent £50 on air passenger duty.
The couple does not have any children and enjoys a lively social life. They also treat themselves to some regular shopping trips.
They spend around £20,000 a year between them on clothes, shoes, make-up, haircuts, eating out and entertainment, which means a hefty VAT bill of £2,608, or £1,304 each.
If you add up all the figures, Chris's total tax bill is £9,700. Jane pays a total of £15,557. In other words, about a third of their joint income goes to the taxman. Scary, isn't it?
Which tax would you most like to see disappear?
