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

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