I’ve nearly finished my 2023-24 Tax Return, but is there anything I can still do if I’ve just gone over the threshold for child benefit charge, the £100k personal allowance clawback threshold, and/or the £100k tax-free childcare threshold?
There is – but you’ll need to act quickly.
Assuming you’ve included all of your allowable expenses correctly, and haven’t forgotten any, the other two most common items that reduce adjusted net income for the purposes of these thresholds are pension contributions (NHS or Private Pension contributions) and Gift-Aided donations made to registered charities (with the proper elections in place).
So, the starting point is to make sure that you’ve included any gift-aided donations and pension contribution relief that have been paid in the year from 6th April 2023 to 5th April 2024.
After that you would need to look at how much the adjusted net income would need to be reduced by to get you back under the appropriate threshold, and whether or not such a payment is affordable to you (v the additional charges and clawbacks that may be due).
Next, we can look at the options.
Pension contributions can only be claimed in the tax year in which they were paid over. So, if you’ve considered your annual allowance limits and pension-tax position properly, this can be a great way to still retain the benefit of your money, whilst mitigating these thresholds, if you make the payments within the relevant tax year. But we’re now in the 2024-25 tax year, so any pension contributions made now will not be able to help with the thresholds for 2023-24 owing to the rules on how you claim.
However, Gift Aid can be related back to the previous tax year. There are strict rules which have to be followed to do this. As long as:
- the charity payment is made prior to the 31st January 2025,
- the proper GiftAid declaration is completed (in your name),
- the donation is included (as a payment in 2024-25 which has been related back to 2023-24) on your original 2023-24 Tax Return submission,
- which must be filed prior to the normal filing deadline of 31st January 2025
Then this can be used to retrospectively and legitimately influence adjusted net income and keep you under those thresholds. And sometimes even a larger donation can be worthwhile when you consider not only generosity to charity, but also, reduction to income tax, preservation of personal allowance and preservation of tax-free childcare (particularly if you have more than one child).
It’s quite specific, and a little fiddly, but there is something you can do.
If you have any questions or would like to discuss Tax Planning, get in touch with our team of experts on 01424 730345 or email bexhill@honeybarrett.co.uk and they will be happy to help.
