THE PRUDENT INVESTOR:?Spring clean your key finances NOW to get tidy returns next year?

With only a month to go until the end of the tax year, it’s time to embark on some financial tidying-up and box-ticking.

Most tax breaks are of the one-off ‘use it or lose it’ variety, so your deadline is April 5. Action now could cut your bill this year or for many years into the future.

I’ve always regarded pensions as my No 1 tax break. The perks are essentially equivalent to getting an instant 25 per cent interest on your contribution if you’re a basic-rate or non-taxpayer.?

Perk: Basic-rate taxpayers can earn ?1,000 a year interest outside of an Isa tax-free, while higher-rate payers are limited to ?500

That ?4,000 counts towards your overall Isa allowance and you can’t touch the money without paying a 25 per cent penalty until you are 60, unless it is used to buy your first home or you are terminally ill with less than 12 months to live.

Inheritance tax should also be in your end-of-year planning.

As I’ve said before, you can give away as much as you want tax??ree as long as you survive for seven years after making the gift.

But there are also specific allowances, the most important of which, at this time of year, is the ?3,000 annual gift allowance.

Each year, you can make one such gift that will immediately fall outside the grip of inheritance tax. If you have not made a gift in the last tax year, then you have one month to squeeze it in.?

Couples where one is a basic- rate taxpayer and the other a non-taxpayer could also save ?238 a year in tax using the marriage allowance.

To do this, the non-taxpayer needs to apply to HM Revenue & Customs to have up to ?1,190 of their personal allowance transferred to their partner.

There is a separate married couple’s allowance for those where one partner was born before April 6, 1935. You cannot claim both of these allowances.

If you hold shares or other investments outside of an Isa, consider your capital gains tax allowance. This allows you to realise gains of up to ?11,700 without paying any tax.

So, if you bought shares for ?10,000 and they are now worth ?20,000, you could sell them to create a gain within your allowance.

If you then rebought them, it would create a new ‘base price’ of ?20,000 for calculating any future gains.

However, if you rebuy the same investment within 30 days, you will fall foul of tax rules. This means you are out of the market and could miss share price gains. But there are ways around this.?

One is for your spouse to rebuy the investment. Another is to rebuy within an Isa or Sipp (self-invested personal pension)??known as ‘bed and Isa’ or ‘bed and Sipp’.

Don’t forget that there will be charges when you sell and rebuy them.

You can also dump shares that have lost you money and offset their losses against gains on other shares.

Remember, too, that charitable donations qualify for tax relief when made using Gift Aid. The charity can claim basic-rate relief, but if you are a higher-rate tax payer, you can claim extra relief, too.

As with pensions, this effectively means that you can give a charity ?100 and it will only cost you ?80 as a basic-rate taxpayer or ?60 as a higher-rate payer.

Other, high-risk options for tax??fficient investing include enterprise investment schemes and venture capital trusts.

But, due to the risk levels, I would not suggest going near these without taking thorough financial advice from someone who specialises in the sector.

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