I think it's stretching things a bit to say that we should attribute credit for our religious freedom to - of all people - Henry VIII and Martin Luther. Neither of them believed in allowing others religious freedom, that is plain.
HVIII and Luther are both part of the history of Western Europe, and it was there (in Britain, anyway) that modern representative democracy first developed. They made no direct contributions to its progress, however. It could be argued that both men were reactionaries who, if anything, slowed the advance of religious freedom.
Since democracy did ultimately flower in Britain, it is reasonable to posit that what HVIII did in taking England out of the papal orbit contributed to that. Certainly democracy was not HVIII's intent.
Luther's contribution, if any, is less clear, especially since the history of Germany is mostly a history of authoritarianism.