Reliefs that reduce your Self Assessment tax bill
A guide to the reliefs you can claim to reduce your Self Assessment tax liability
A few legitimate reliefs can reduce your personal Self Assessment liability. The two most common for directors are pension contributions and Gift Aid.
Pension contributions
Personal pension contributions (paid by you, not the company) attract relief at your tax rate. A basic rate taxpayer paying in £800 gets a £200 top-up from HMRC, making £1,000 in the pension. A higher rate taxpayer claims a further 20% through Self Assessment, so a £1,000 contribution effectively costs £600.
Limits to be aware of
Personal and employer contributions both count towards the £60,000 annual allowance. If you did not use your full allowance in the previous three years, you may be able to carry it forward and pay in more. But personal contributions only attract relief up to the level of your salary, and dividends do not count, so a low salary can limit what you can pay in personally. Where that applies, contributions paid directly by the company are often more effective.
Gift Aid
Cash donations to UK charities under Gift Aid are made net of basic rate tax. Higher rate taxpayers claim the difference between higher rate and basic rate through Self Assessment. Tell us about any Gift Aid donations when we prepare your return.
💡 Good to know: A personal pension contribution can be especially worthwhile if you are near the higher rate threshold, as it can keep income from being taxed at 40%. Tell us before making a large contribution and we will check what relief is available to you.
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