There are precious few opportunities to make an arrangement after the end of a tax year, and carry the benefit back to impact tax liabilities of the previous tax year.
One such opportunity involves gift aid, and has the full blessing of HMRC.
According to HMRC you can:
“… ask for a Gift Aid donations to be treated as being paid in the previous tax year if you paid enough tax that year to cover both any Gift Aid gifts you made that year and the ones you want to backdate.
Your request to carry back the donation must be made before or at the same time as you complete your Self Assessment tax return for the previous year but no later than the filing deadline for the tax return, which is 31 October if you file a paper tax return, or 31 January if you file online. If you don’t complete a tax return you can ask your Tax Office to send you a form P810 Tax Review – you must send this by no later than 31 January after the end of the tax year to which you wish to carry back your gift.”
In non-tax speak, you can basically carry back gift aid payments made during part of a tax year, and help reduce your tax liability for the previous tax year. The two main conditions that you must observe are:
- You must have paid enough income tax in both years to cover the donations made, and
- You must make the claim to carry back relief before the filing deadline for your self-assessment tax return in the tax year that you make the gift aid payment.
This strategy can be particularly useful if your income marginally exceeds £100,000 as the carry back will not only save you income tax at 20% (40% – the basic rate tax deducted from the payment you make) but also save you the gradual loss of your £10,000 personal allowance.