Over the last few years a great deal of attention has been paid to PEPs and Tessas due to the fact they are very tax efficient. With the onset of the new Individual Savings Accounts due out next April, which will still offer some tax advantages, such coverage is set to continue.

Making the most of your money is an area most people now recognise as being both important and attainable. With earnings having risen over the years and tax 'penalties' on company cars having risen to high levels, then there are an increasing number of people who have to pay higher rate tax. So what should you be doing if you find yourself in this bracket?

One of the first considerations is to make the most of the very generous tax relief on pension contributions at the moment, whether it is to a Personal Pension or as Additional Voluntary Contributions into a company scheme. A higher rate taxpayer can usually get the full 40 per cent relief on money paid in. Given that the fund grows virtually free of tax, it is an efficient method of saving.

If you are married and your partner is a basic rate tax payer, then remember to transfer any deposit accounts, Gilts, shares or unit trusts into his or her name to avoid any higher rate liability on income tax.

Regular savings products that offer generous tax concessions are qualifying life policies such as most endowment plans or maximum investment plans where the proceeds are free of tax. The Tax Free National Savings products become worth looking at such as the Index Linked and the five year fixed rate. Current rates for these are inflation proofing plus two per cent and four per cent respectively.

For those within 20 years of retirement, there is a very efficient investment that is often overlooked which can save many thousands of pounds in tax, simply by putting you in control of when the tax is paid. These are Investment Bonds, and because they offer an extra amount of life cover, albeit a minimal one per cent, they count as non-income producing assets and so any higher rate tax liability is only ever due on encashment or on withdrawals greater than five per cent a year up to a maximum of 20 years.

This means if you were going to be a basic rate tax payer on retirement, you can leave your money to grow at the normal basic rate and have no liability to any higher rate tax at all.

For more information on these bonds, call 01484 860123.

Alan Mills is an independent financial adviser with A. J. Mills Independent Financial Advisers, a member of DBS Financial Management PLC, which is regulated by the Personal Investment Authority. Not all contracts of PHI are regulated by the PIA. Answers given are for general guidance only and specific advice should be taken before acting on any of the suggestions made. All information is based on our understanding of current tax practices which are subject to change. The value of shares and investments can go down as well as up.

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