Are you making the most of your tax allowances?

Personal allowance Everyone is entitled to a basic personal allowance, which is the amount of income you can receive before you start paying income tax. Your personal allowance is not transferable; however, couples can hold income-producing savings or investments in the name of a non-earning partner. This allowance is available each tax year, which runs from April 6 to April 5.

Age allowance If you are over 65, you are entitled to an increased personal allowance called age allowance. You will only get the full age allowance if your income is below a set amount (£18,300 in 2003/04). Once it goes over that limit, the age allowance gradually slides away until you are back to the basic personal allowance.

Married couple’s allowance If you are a married couple and at least one of you was 65 on or before 5 April 2000, you are entitled to the married couple’s allowance. This can slide away like the age allowance once age allowance has slid to the basic personal allowance, but not below the minimum amount.

* Annual capital gains tax exemption Everyone gets an annual capital gains tax exemption, set at £7,900 for 2003/04. You can make profits up to this sum each year without paying any tax - have you utilised this?

* Pension allowance
Have you funded your pension to the maximum level permitted? You receive full tax relief at your highest rate(s) on contributions made into a personal/stakeholder pension scheme. Your maximum allowable contributions are based on an age-related percentage of your earnings (capped at £99,000 for tax year 2003/04).

Tax-friendly investments

* ISA allowance You can put up to £7,000 (2003/04) into an Individual Savings Account to earn tax-efficient income and gains. Have you used up your allowance?
* Life insurance bonds These include with-profits bonds and unit-linked investment bonds. You can withdraw 5 per cent a year of your original capital for 20 years with no immediate income tax liability.
* Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) Investment in an EIS company, which must be unquoted, and a VCT (whose assets are largely shares in unquoted companies) allow deferment of capital gains tax. They also carry sizeable income tax relief.
* Offshore roll-up funds These may be useful if you are planning to move overseas before you cash them in, or if you are expecting a drop in your income, perhaps on retirement. They roll up income and gains within the fund, and there is no tax to pay until you sell or make a gift.