How to pay less

Play along with the Revenue to get the highest income.

Marriage and tax: husband and wife can choose to be taxed individually , with each eligible for the single person's allowance. If the wife does not have any earnings, then the husband can claim the married allowance. This is only pounds 1,790 a year, taxed at a special 15 per cent rate, but it is still worth having.

If your earnings are below the threshold of pounds 3,765 a year you are not liable for income tax. and you can have the interest paid gross up to the threshold.

Most savings accounts deduct the tax before they pay interest - but you can ask the building society or bank to pay your interest gross (without the tax being deducted). It takes five minutes or less to fill in the form - but every year the Inland Revenue pockets pounds 500 million a year from people who don't know about - or can't be bothered with - the paperwork.

Next, take a look at your pension - one form of saving in which the tax man is particularly generous. Depending on age, as much as 25 per cent of income can be put into a company or personal pension plan and offset at your top rate of tax.

If you have a personal pension, you can make use of tax allowances on contributions for the previous seven years if you failed to invest the full amount allowed.

Next, look at your savings and investments. Peps and Tessas are both simple ways to provide for the future without paying tax. In recent years, the government has tried to encourage long-term investment. If you can salt money away for five years in a Tessa, for instance, you will receive a much more attractive return than with a conventional deposit account.

Peps (personal equity plans) are probably some of the best tax-free vehicles for investment and can be used efficiently as part of a retirement plan.

Up to pounds 6,000 a year can be invested in UK shares or unit trusts as a lump sum or on a basis of regular investment into a variety of Pep schemes, or pounds 1,500 if the investment is largely overseas. You can also put a further pounds 3,000 a year in a single-company Pep.

The main attraction of Peps is that, if they are held for a year or more, all the income and capital gains are tax free. In addition, husband and wife can individually invest the full amount.

National Savings are also worth considering, offering a combination of security and tax saving. In addition to the recently introduced Pensioners Bond, there are now a variety of investments offered that are tax free if held to maturity.

Permanent health and medical insurance may also form part of your financial and tax planning. People aged 60 or over can now receive tax relief on premiums for health insurance.

If you need to find out more about tax allowances, the Inland Revenue is putting a lot of effort into making the rules and regulations understandable. There's a whole series of booklets available free of charge from your local tax office - look in the directory under Inland Revenue.

If you are concerned about the amount of tax you are being asked to pay, the sensible course will be to consult an accountant.

The same applies if you are self-employed, or your affairs are complicated. It may save you money - and it will almost certainly bring you peace of mind