How to reduce personal tax retrospectively

With the 31 January Self Assessment tax payment deadline looming, we often encounter clients that want to reduce their tax liabilities. But surely it’s too late now?

Unfortunately, the good old days where it was possible to make a pension contribution in one tax year and relate it back to the previous year are long gone, with no such retrospection now possible.

However, there are still a couple of tax reliefs available where you have the option to claim the tax relief in the current tax year, or carry it back to the previous tax year.

The first of these relates to investments made under the Enterprise Investment Scheme (EIS) or the Seed Enterprise Investment Scheme (SEIS). These tax advantaged investments give the investor income tax relief (30% of the investment made for EIS; 50% of the investment for SEIS) which can be claimed in the tax year of investment, OR in the previous tax year.

Secondly, charitable donations under the gift aid scheme can be related back to the previous tax year. Under gift aid, basic rate (20%) tax relief is given to the charity at source, and therefore further tax relief is only available through Self Assessment for higher rate (40%) and additional rate (45%) taxpayers.

In both cases, claiming the tax relief in the previous tax year would also help to reduce the payments on account for the current tax year, the first of which also falls due for payment this month.