Last minute

The tax return deadline is fast approaching and if you are one of the several million people who have not yet filed, time is rapidly running out.

Leaving it this late to deal with the return doesn’t just increase stress levels, it reduces the chances of you being able to reduce your tax bill.

Most tax planning needs to be done before or within the tax year, not after it ends. Even now however there may be some things that you can do to cut the tax due on 31 January.

If you have not yet filed your tax return, you can make a donation to charity and backdate it to the 2016/17 tax year.

This will reduce your tax bill if you pay tax at 40%, 45% or 60% (and yes, some people really are exposed to tax at 60%).

You cannot do this if your tax return has already been filed and as the rules are complex, you should take advice before acting.

You can backdate investments in Enterprise Investment Scheme (EIS) or Seed Enterprise Investment Scheme (SEIS) companies to 2016/17 as long as the investments are made by 5 April 2018.

Investing in an EIS company generates income tax relief of up to 30% of the amount invested and with SEIS the tax relief can be up to 50% of the amount invested.

The tax relief can be spread between the tax year of investment and the previous tax year.

Gains on EIS and SEIS investments held for at least three years are exempt from capital gains tax and there is further relief from income tax if the investments become worthless.

If it all sounds too good to be true, you will not be surprised to learn that there are strict rules and that the investments are inevitably high risk.

EIS and SEIS can also be useful for sheltering capital gains.

You may be able to reduce the tax falling due on 31 January if you have good grounds for believing that your income in the 2017/18 tax year will be lower than in the 2016/17 tax year.

There could still be opportunities between now and 5 April to achieve that.

While these ideas may save the day, the best results are always achieved by planning ahead. February would be a good time to start planning.

As the old saying goes, better late than never – but better never late.

Paul Aplin is a tax partner with A C Mole & Sons and Deputy President of the Institute of Chartered Accountants in England and Wales; you can follow him on Twitter at @PaulAplinOnTax. He and fellow tax partner Amanda Gunter can be contacted on 01823 624450.