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.
Key Facts
- Tax relief for pensions can only be given in the tax year in which contributions are made
- Income tax relief for EIS and SEIS investments can be claimed in the previous tax year
- Higher rate tax relief for gift aid donations can also be related back to the previous year
For further advice on this matter, please contact me.
Related Posts
November 6, 2017
How to reduce company car tax
Company car tax is based on the car’s list price when new, and its Co2 emissions, and with annual increases, the tax/NIC on a company car benefit can soon mount up.
December 3, 2018
KRW: Your property tax experts
Buy-to-let landlords have been under attack in recent years with the 3% stamp duty surcharge, the restriction of tax relief for mortgage interest, and now changes to letting relief.
December 3, 2018
Save tax by employing your nanny through your company
However, what if you instead employed your nanny through your company, by adding them to the company’s payroll?
June 7, 2018
Tax GDPR: KRW’s Privacy Policy
With GDPR now live, we want to ensure that all of our clients are made aware of our privacy policy.
March 1, 2018
The tax advantages of holding shares in a holding company
There are many reasons to consider holding the shares in your trading company through a separate holding company, the main one being to safeguard retained profits.
June 7, 2018
Company cars for the kids
With company car tax based on CO2 emissions and the list price when new, company cars are rarely tax efficient for company owners, usually due to the type of cars they want to drive!