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11th Hour tax planning - pay less tax, even if you’ve already completed your tax return

  • The self-assessment tax return deadline is midnight on 31 January, but it’s not too late to cut your tax bill for 2016/17 – even if you’ve already submitted your return.
  • You may even be able to cut your tax bill for previous years – going back as far as 2015/16 - if you act fast.
  • You could make a major difference to next year’s return too – and save thousands of pounds if you get cracking before April 5th.

Sarah Coles, Personal Finance Analyst, Hargreaves Lansdown:

"If you’ve left your tax return this late, you could be forgiven for thinking you’ll be lucky to get it done in time at all – let alone find clever ways to cut your tax bill. Meanwhile, if you have submitted your tax return, you could be forgiven for taking a huge sigh of relief and putting it to the back of your mind."

"However, regardless of which camp you are in, you could still save money at the 11th hour by asking yourself a handful of questions."

"If you’re yet to submit your return, this could actually make the process easier, and if you have already sent it in, you still have time to cut your bill: you have until the deadline to log back in and make changes."

1. Did I claim any extra tax on pensions?

If you’re a 40% or 45% taxpayer, including pension contributions on your return could significantly reduce your tax bill. It’s in the section under tax reliefs listed as ‘payments to registered pension schemes where basic rate tax relief will be claimed by your pension provider’.

2. Did I do it properly?

The key here is to make sure you enter the gross value of contributions. This isn’t just a total of all the money you paid in: it’s the total of everything you paid in, plus tax relief at 20% on top. Your pension provider will be able to tell you this figure, or you’ll find it on your pension statement.

3. Is there an easier way to claim for the things that were too much trouble?

If you work from home occasionally, or use your own car for work every so often, it can seem like an awful lot of trouble to keep copious records, collect all your bills, and do complex calculations, just to make a relatively modest expenses claim. If you’ve simply ignored these expenses in the past, there are two shortcuts that are well worth knowing about.

For homeworking, you can use a flat rate of expenses: £10 a month for 25-50 hours a month, £18 for 51-100 hours, and £26 for 101 hours or more. If you are using your car for work purposes (and you haven’t claimed it as a business vehicle), you can claim 45p per mile for the first 10,000 miles and 25p per mile thereafter.

4. Can I claim for previous years?

If you have stumbled across something this year, and realise you should have been claiming for previous years, then you can amend returns from the relevant years. If you make changes before 31 January, you can go back as far as the tax year 2015/16.

If you filed online, you can do this by logging in, going into your self-assessment account and selecting ‘more self-assessment details.’ In the left-hand menu, chose ‘at a glance’, then ‘tax return options’, and go into the return you want to amend. You can then make changes and file it again.

If you submitted it on paper, you will need to print off a new return and send the amended pages. You should write ‘amendment’ on each page, along with your name and unique taxpayer reference. You should then send it to the address on your self-assessment paperwork.

Once HMRC has had time to process this, you will see whether you have a refund or more tax due on your statement, and if the taxman owes you money you can request a repayment. This will take up to four weeks to reach your bank account.

5. Can I do anything now and claim it back in this tax return?

There are a handful of ‘carry back’ opportunities, including a loophole relating to donations to charity, on which you get tax relief known as gift aid.

Any gift aid donation you make up until the day you file your tax return can be included in your previous year’s tax return, so you can make a donation now, and include it in your tax return for 2016/17. This is particularly useful if your income has fallen, so you can claim gift aid in a year when you were paying a higher rate of tax.

Another carry back rule applies if you have invested in an Enterprise Investment Scheme (EIS) in the current tax year, and you want to carry back income tax relief of 30% to the previous year. You can’t claim back more relief than you have paid, so this is particularly useful if you won’t earn enough to offset the tax relief this year.

Don’t forget this tax year

There’s a limited number of things you can do to reduce your tax bill for the 2016/17 tax year. However, there are plenty more you can do to slash your tax bill for the 2017/18 tax year if you act now.

Take the time to consider whether you could make your savings and investments more tax efficient, by wrapping them in an ISA. You have an allowance of £20,000 this year, so there’s plenty of opportunity to shelter from the taxman.

Also think about making extra pension contributions. If, for example, you were able to contribute £16,000, the government will add £4,000 basic rate tax relief to give a gross contribution of £20,000. In your next tax return a 40% taxpayer may be able to reclaim another £4,000 and a higher rate taxpayer another £4,500.