A week in tax and politics

MONEY TALK

This week the curtain comes down on the tax year, which means the cut-off date for a range of wheezes for saving tax. Thanks to the election the usual clarion calls from accountants and financial advisers to use up allowances are even shriller this year.

Clampdowns on PEPs, pension tax relief and a range of other tax breaks are all on Gordon Brown's hidden agenda, these financial experts would have us believe - all the more reason to act (for which read buy) now, they say. Well, maybe.

Certainly the panic tactics haven't worked yet. People aren't piling into PEPs in the numbers expected, suggesting investors are more worried about the stock market bubble bursting than what Labour might do to PEPs and tax on investments.

But hype aside, what wheezes are worth considering before the end-of- tax-year deadline on 5 April?

Buying a PEP with the stock market at its present level may well mean signing up to lose money this year. This may not be of great concern for those investing for the long term - say, a minimum of five years. Over this period the stock market should still be a better home for savings than the building society.

So if you're prepared to take these short-term risks and you're determined to use this year's PEP allowance then go ahead. But most people are probably better off waiting.

If Labour wins and decides to clamp down on PEPs then it might do something as early as June, but any earlier change is unlikely. In the meantime, PEPs will still be available and the stock market could be lower.

If you still want to go ahead this tax year - perhaps because you want to ensure you get at least two years' PEPs in before any change - then my recommendations for all but the professionals are as follows: for pounds 6,000 or less, the Legal & General UK Index Tracking PEP using its phased investment option. This will drip-feed your money into the stock market over the next year, which should benefit you if the market tumbles and then struggles to recover.

As well as a pounds 6,000 PEP, you can put another pounds 3,000 into a single-company PEP. These are often not worth the risks but Legal & General's Election PEP offers a relatively low-risk way of taking up this allowance. I covered both these deals in detail last week.

If you are sitting on big profits in a share portfolio and haven't used up this year's capital gains tax allowance, it is worth looking at selling this week (utility companies facing Labour's windfall tax might be good candidates), "bed-and-breakfasting" or even "bed-and-PEPping". Never mind what Labour might do, this is good financial housekeeping, full stop. And if you sell you'll also be less exposed to any stock market fall.

The argument for paying more into a personal pension before the end of the tax year seems weaker: unused allow-ances can be carried forward up to six years, and a Labour move to cut tax relief would be surprising given the consensus that people should be encouraged to make their own retirement provision.

Inheritance tax is an area where Labour has said it wants to close "loopholes". There is a pounds 3,000 tax-free annual allowance on gifts, which may be worth taking up. But this is a complicated subject that probably requires advice.

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