1 min Read
28 Nov 2012

Written by Damien

Damien is one of the most widely quoted money and investment experts in the national press and has made numerous radio & TV appearances. He created MoneytotheMasses.com while working in the City when he became disillusioned with the way the public were left to fend for themselves because they could not afford financial advice.

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Reader Q: Can I pay a pension contribution now to reduce last year’s tax bill?

Reader Question:

I have a hefty tax bill to pay for 2011/2012 tax year due to a taxable event gain.  However if I pay a one off payment into my pension will I be able to use that to reduce my last year's tax bill?  In other words can I include a one off payment made this year in my last year's tax return?

My response:

Unfortunately no. The tax relief applicable to a pension payment can only be claimed for the tax year in which the pension contribution is made. However, given the size of your tax bill and its complexity I suggest that you employ the services of a tax accountant to help minimise it. If you don't already have one then you can locate an accountant via  the ICAEW directory of chartered accountants.

I hope that helps

Best Wishes

 

Damien

Money to the Masses

Website: www.moneytothemasses.com

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Comments

  1. Darren Amos November 28, 2012 at 6:38 pm

    That is correct. However if you make a the maximum contribution for this tax year (2012/13) you can then make further contributions that can be backdated to use the last 3 years allowances. (you must maximum fund this year first, then each year in turn starting with 3 years ago, then 2 years ago, then last year, taking into account the pension contributions already made) It won’t stop you having to pay your current tax bill, but at least you’ll get some of the tax back in the form of tax relief against next years bill. Your accountant may be able to get your “payments on account” reduced based upon the expected tax relief too. I would agree with Damien that you should ensure you are speaking to your accountant, and also a financial adviser, if you are looking to utilise pension contributions to reduce your tax liability