Use all your allowances to dodge the taxman

With the end of the tax year fast approaching, it's time to make sure you've made the most of the allowances available. It's possible for higher earners to protect up to £1.3m from the taxman, says Ali Hussain in The Sunday Times, but with the early Easter holidays, time is running out to sort out the paperwork before the tax year officially ends at midnight on 5 April. So what tax allowances should you watch out for?

Individual Savings Accounts (Isa)

We have more on the long-term future for Isas in the cover story on page 24, but in the current tax year investors can save up to £15,240 tax-free in an Isa. That money can be split between cash or investments. Now, from April 2016, basic-rate taxpayers will not incur any tax on the first £1,000 of any savings (£500 for higher-rate taxpayers), which some experts suggest could make Isas irrelevant for some.

But we think it makes sense to maximise the benefits. Your annual Isa allowance is a "use it or lose it" benefit, and even if you don't want to invest the money right now it makes sense to get it safely into the wrapper for future use.

Another quick point on Isas with effect from 6 April 2016, you will be able to withdraw money and put it back in within the same tax year. This doesn't help you in the current tax year, but will make Isas considerably more flexible from the next tax year onwards.

Junior Isas

Parents and grandparents can also pay £4,080 tax-free into a Junior Isa this year, although children can onlywithdraw the money when they are 18. It's also possible to invest up to £2,880 a year into a pension for a child or grandchild, which grosses up to £3,600.

Pension contributions

Make the most of pension tax relief. You can save up to £40,000 in a pension this year (as long as you earn at least that much). A basic-rate taxpayer saving £80 a month would have their contribution topped up to £100. A higher-rate taxpayer is due an additional 20% in tax relief (but don't forget to make sure that you claim it back via your self-assessment form). You can carry forward up to three years' unused pension contributions, so some investors could save up to £180,000 into a pension this year.

From April, top-rate taxpayers will have their annual allowance clawed back until it falls to £10,000 once you are earning £210,000, so it's worth taking full advantage now if you can just make sure you don't exceed the Lifetime Allowance of £1m.

Capital gains tax

This year taxpayers have a capital-gains tax allowance of £11,100, meaning they can make a capital gain of up to this amount from selling investments without incurring a capital gains tax charge (currently 18% for basic-rate taxpayers and 28% for higher-rate payers). It's not possible to carry a previous year's allowance forward, so it's worth planning any sales accordingly for example, by splitting them across two tax years. However, some sellers may want to wait until the next tax year. From April, the tax charge will be cut to 10% for basic-rate taxpayers and 20% for higher-rate taxpayers. (Although not for residential property sales, besides your main residence.)

Venture capital trusts (VCTs)

Higher-risk options for wealthier taxpayers include VCTs. A VCT is similar to an investment trust in that it is a listed company that invests in other companies. However, VCTs only invest in much smaller companies, which makes them riskier. In exchange, the government offers big tax breaks on them. If you buy newly issued VCT shares (as opposed to those traded on the secondary market), you benefit from 30% upfront tax relief, as long as you hold the VCT for at least five years.

Any profits made on shares in VCTs are also exempt from capital-gains tax when taken, and dividends are also tax free. You can invest up to £200,000 in VCTs in any given tax year just bear in mind, these are risky and expensive. So don't do it simply for the tax breaks.