With just under four weeks to go until the end of the tax year, time is running out for you to review your arrangements and make sure you are making the best use of available tax reliefs.

This year’s 5 April tax deadline brings some of the most significant changes for taxpayers in recent years.

Here, David Truman, partner at Menzies LLP, reveals the most important year-end tax tips you should consider:

Making the most of the rate change

From 6 April 2013 the top rate of income tax falls from 50% to 45%.

Planning in advance by deferring income from the current tax year to the next, and advancing expenditure or deductions into the current tax year can substantially improve your tax position.

Depending on the terms of your contact, bonuses or dividends can be also deferred into the next tax year while advancing pension contributions to before 5 April 2013.

Maximise your pension contributions

Pension contributions legislation has changed many times in recent years and with the budget scheduled for 20 March, there may be further changes to come. Prior to the end of this tax year you should consider:

• Making pension contributions which maximise your full annual allowance. The allowance stands at £50,000 for 2012-13 and 2013-14, and will reduce to £40,000 thereafter.
• Carrying forward unused allowances from earlier tax years. Individuals may be able to carry unused allowances from the previous three tax years forward. This could allow a one-off contribution of up to £200,000.
• Some SIPP owners can make a one-off change to their pension ‘input period’ to enable a further £50,000 contribution at the higher allowance.
• If you are an additional rate taxpayer, you can still benefit from up to 50% income tax relief on personal contributions to pensions for the remainder of 2012-13. It is worth locking in this rate now.

Married couples can work together

Each spouse is taxed separately but an important element of basic planning is to make maximum use of personal reliefs and rate tax bands.

The personal allowance cannot be transferred between spouses, but you can consider giving a gift of assets to distribute income more evenly. For example, you can save up to £400 a year by transferring just £1,000 of savings income from a higher rate (40%) taxpaying spouse to one with income below the personal allowance (£8,105). If you are paying the additional rate of tax (50%), which applies to those with taxable income above £150,000, your saving could be £500 a year.

This principle extends to Capital Gains Tax (CGT), too. While bed and breakfasting (sale and repurchase) of shares is no longer tax effective, there are two variants which still work; sale by one spouse and repurchase by the other, and sale followed by repurchase via an Individual Savings Account (ISA). Couples can also use these techniques to establish a loss that can be set against any gains.

Children and child benefit

Children have their own allowances and tax bands and it may be possible for a parent to achieve tax savings by transferring income-producing assets to their child. Remember that children also have their own CGT annual exemption of £10,600. All Government contributions such as the Child Trust Fund (CTF) have now ceased, however existing CTF accounts continue alongside the new Junior ISA. If you are a parent, you, your family and friends can all contribute up to £3,600 annually tax-free, but remember that there will be no Government contributions and no access to the funds until the child reaches 18.

Inheritance tax – planning ahead

Starting early on inheritance planning can significantly help to make the best use of available reliefs. For example, gifts of up to £3,000 a year can be made on a tax-free basis. The limit increases to £6,000 if the previous year’s annual exemption was not used, and do not forget gifts out of after-tax income, such as regular payments to family members for birthdays or anniversaries.

Give it away and save: Charity

Making charitable donations under the Gift Aid scheme can offer significant benefits to both donor and the charity. For example, if you make a cash gift of £80 you can get higher-rate tax relief of £20 so that the net cost of the gift is only £60.

Always remember to keep a record of any gifts you make. It may also be possible for you to make gifts of quoted shares and securities or land and buildings to charities and claim income tax relief on the value. This has potential to be a great tax efficient measure if you are making larger charitable donations.

Tax efficient investment vehicles

Putting up to £11,280 into an ISA, including up to £5,640 into cash, where your income and gains will not be taxable is a well-known way to save on tax. The government has updated several useful tax efficient vehicles for investors to get the most from their holdings. The Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) provide attractive income tax reductions for holding investments in small and start-up companies, while Venture Capital Trusts (VCTs) exempt investors from tax on gains from disposal of shares. It is important not to make investment decisions based on tax factors alone, however. Specific investment risks must also be considered.