How not to miss out on reducing the April bill

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The Independent Online
THE END of the tax year is only six weeks away. If you don't take action to reduce your tax bill before 5th April you may miss out on some opportunities altogether. Here is our checklist of the tax saving possibilities that run out at the end of this tax year.

l It is your last chance to use up losses created by indexation allowance on disposals made after 29th November 1993. In the November 1993 Budget the Chancellor originally announced that in future a loss could not be created or increased by indexation. Subsequently he relaxed this slightly, allowing up to £10,000 of such losses to be offset against gains in 1993/94 or 1994/95. So if you do not realise these losses, or realise the gains to offset them against this tax year you will lose them for ever. The calculations can be complex - get your accountant or broker to advise.

l Even if you have no indexation losses you should try to use up your personal allowance for capital gains tax of £5,800. Stockbrokers and unit trust companies can arrange for you to "bed and breakfast" (sell one day and buy back the next) your investments for lower than normal dealing charges.

l If you are bed and breakfasting shares or units, remember to use your full PEP allowance of £6,000 for a general PEP and £3,000 for a single company PEP when you buy them back. That way you won't need to "bed and breakfast" them again - all the future gains and income will be tax free.

l You will not normally be able to get relief in 1993/94 for personal pension payments unless you make the contributions before 5th April this year. Remember that you also have to submit an election to relate the premium back to 1993/94, but you have until 5th July 1995 to do so.

l If you can still find your March 1989 payslip, check that it shows the correct allowances - you only have until 5th April to make a claim for personal allowances in 1988/89. The easiest point to check is the letter at the end of the tax code. It should normally be L for a single, childless, person or married woman, and H for a married man or for a person receiving the additional personal allowance for looking after a child. If a couple had elected for separate taxation of wife's earnings they would both have codes ending in L. If your code appears to be wrong, write to the Inland Revenue now saying that you want to make a "protective claim" and asking them to investigate.

l Have you paid as much as you can into your TESSA? Even if you are not sure that you will be able to keep this for the full five years it can sometimes be worth starting one - the interest rates offered are generally higher than those available otherwise for small amounts. But check first that there are no penalties for early withdrawal.

l It is your last chance to use up your £3,000 annual inheritance tax exemption for the year 1993/94 if you have not already done so. You will need to make gifts totalling £6,000, using both this year's and last year's exemption.

l Don't do anything yet about inheritance tax mitigation schemes that involved making loans into trust which were repaid over twenty years - but be prepared to make a fast decision. These schemes were popular in the early 1980s, but a proposal in the Budget could make you liable to tax on a notional "income" from the loan. This clause may well not survive unscathed as the Finance Bill passes through Parliament, but if it does you may need to unscramble the arrangements before 5th April.