FAMILY finances are set to take a battering in the new year, but with some sophisticated planning you could knock £10,000 off your tax bill and start to feel the benefit almost immediately in your pay packet.

More than 1m families face a mortgage-repayment shock next year when they come to the end of cheap fixed rates, and there are growing signs that fuel bills will rise too.

However, accountants said that if families made better use of their allowances and tax reliefs it could considerably ease the pain.

One of the best ways to cut your tax bill is to invest in a venture capital trust - although it is really an option only for sophisticated investors - and now is the time of year when the schemes start to flood on to the market.

Invest in a scheme now and you could save thousands in the first three months of 2008 - just as bigger bills hit home.

We asked accountant Grant Thornton to work out how much you could save by following its advice to the letter.

Invest in a venture capital trust
VCTs are funds that invest in small, unquoted firms or shares listed on the Alternative Investment Market (AIM) You get income-tax relief at 30% on contributions to new VCT shares of up to £200,000, even if you are a basic-rate taxpayer, provided you hold the shares for five years. So if you invested the maximum £200,000, you would get a tax rebate of £60,000. Advisers say that an investment of £10,000 is more typical, producing a saving of £3,000.

If you invest now you will get a rebate against this year’s tax bill which needs to be paid by January 31, 2009. However, you don’t have to wait that long to claim the tax back.

Once you have received your share certificate you can contact your tax office and, if you are paid under the PAYE system, ask the Revenue to adjust your tax code. That means less tax will be taken out of your pay packet for the rest of this tax year, which ends on April 5.

Millions of self-employed people can also cut the tax they owe by this January’s self-assessment deadline. Part of this will be a forward “payment on account”, enabling you to offset the amount you have invested in VCTs and make an immediate saving.

If you would prefer to receive a rebate as a lump sum, though, you will have to wait until you submit this year’s tax return after April 5.

VCTs can be risky but managers have been launching funds that limit the risks to make them more attractive (see below).

Mark Dampier of Hargreaves Lansdown, a financial adviser, said: “There is an argument that if you already have, say, 20% of your portfolio in smaller companies, why not move half into a VCT to get the tax break? Having said that, VCT firms are more illiquid than smaller companies so I think you need to be investing with a ten-year view.”

Saving: £3,000

Split what you own
If you are a higher-rate taxpayer, but your husband or wife is in a lower bracket, you can cut your tax bill by transferring assets into the name of the lower taxpayer.

Mike Warburton at Grant Thornton said: “It’s one of the simplest ways to cut a tax bill, but most people don’t make the most of it.”

You don’t even need to go to a solicitor to split the ownership of a buy-to-let property, just sign a letter stating how it is shared.

Suppose a higher-rate taxpayer has a buy-to-let worth about £300,000 - close to the price of a typical home - and gets about £14,000 in rental profit a year after mortgage interest, based on current rental yields. The tax bill would be £5,600 a year. But if his or her spouse is a basic-rate taxpayer, they could transfer half of the house into the spouse’s name. The spouse then claims half of the profits and the couple would jointly pay only £4,340. When you sell you can also use both capital-gains-tax allowances – £9,200 this tax year.

Saving: £1,260

Get clever with your mortgage
Offset mortgages, which work by setting your savings against your borrowings to save you money, account for only 10% of the market even though they could save you more than £1,000 in tax.

Rather than earning interest on your savings, the money in effect cuts the size of your overall mortgage, so you pay less interest and clear your debt faster. The other big plus is that because you are earning no interest on your savings there is no tax to pay.

First Direct is offering an offset with a fixed rate of 4.99% for two years, the cheapest fix on the market. A higher-rate taxpayer would need a savings account paying 8.3% to be better off not offsetting his or her savings, yet the leading easy access savings account from Newcastle building society pays only 6.46%.

A higher-rate taxpayer with £50,000 in the Newcastle account would pay £1,290 tax a year. By offsetting the same amount against a mortgage they would have no tax to pay.

Richard Morea at L&C, a mortgage broker, said: “It’s such a great saving, especially for higher-rate taxpayers, that more people should be taking advantage.”

The benefits of linking taxable savings to your mortgage are not so clear cut if you are a basic-rate taxpayer. First Direct’s two-year fix at 4.99% is equivalent to earning 6.2% from savings in the basic-tax bracket. Newcastle’s savings account pays more, as does Halifax’s fixed-rate Isa at 6.5%.

Saving: £1,290

Don’t dismiss child vouchers
Millions of workers are missing out on substantial tax savings because they don’t sign up for their employer’s childcare vouchers.

The schemes allow you to swap part of your salary for vouchers worth up to £55 a week, which you must put towards a government-registered nursery, child minder or nanny. Where a husband and wife are working, both of them can claim.

The money is paid before income tax and National Insurance contributions (Nics) - a saving of about £2,100 a year if one of you is a higher-rate taxpayer, and the other works part time and pays tax at the basic rate, according to Grant Thornton.

Saving: £2,100

Boost your pension contributions
Workers can take out a personal pension alongside their company scheme, pay in extra contributions and get a rebate when they fill in their tax return.

You and your employer can invest an amount equivalent to your annual salary each year and receive tax relief on the contributions, up to a maximum of £225,000.

The government offers tax relief on contributions of 22p for every 78p invested. A higher-rate taxpayer can claim a further 18p through their tax return.

Bonuses count as part of your salary for pension purposes, and allowing your firm to pay your bonus straight into your pension has tax advantages. You don’t have to pay tax on it and your employer won’t pay Nics, and may share the saving with you.

Kate Ragnauth at EBS Management, a pensions adviser, said: “Revenue & Customs allows you to invest on the basis of estimated earnings, so even if you do not have accurate figures before the tax year ends you do not have to wait until you do. Any errors can be corrected in the new tax year.”

By contributing an extra £6,000 to your pension a higher-rate taxpayer gets £2,400 in tax relief.

Saving: £2,400.

Profit from funds with perks

Are venture-capital trusts high risk?

Generally speaking, yes. To qualify for tax relief, VCTs must invest in companies with assets of less than £7m and no more than 50 full-time employees.

Analysts say such small firms have a higher failure rate than larger ones. However, managers are launching a new breed of “protected” VCTs which aim to limit their clients’ potential losses while still offering juicy tax breaks.

For example, Downing’s current crop of protected VCTs invest in UK companies with substantial assets such as pubs, children’s nurseries and health clubs - the theory being that if the companies get into trouble, they always have these assets to fall back on.

The Edge Performance VCT, which has music promoter Harvey Goldsmith on its management team, invests in live events and backs firms that have licensing agreements with big music promoters.

None of these schemes offers a cast-iron guarantee, though, so you should always take independent financial advice.

So will I make any money on top of my tax breaks?

While VCTs are high risk, they can provide good returns over the long term. Downing’s first protected VCT has returned 130% over the past five years.

At the other end of the league table, the Hygea VCT, which invests in healthcare and biotech firms, has slumped 70% over the same period.

You should invest for at least 10 years to maximise returns, given the risks involved. Your returns are more likely to come from dividends than from capital gains because it can be difficult to sell VCT shares on the secondhand market.

Ben Yearsley, a financial adviser who personally invests in VCTs, said: “It is often said it is hard to get out of VCTs, but we have had clients who have sold without liquidity problems. And VCTs have provided me with a very good income stream over the years - I buy VCTs with the intention of holding them for the long term.”

So how do I decide if a VCT is right for me?

The minimum VCT investment is normally £5,000 and they should make up no more than 10% of a portfolio - so you need assets of at least £50,000.

Richard Allen of Allenbridge said: “Most of our clients are high-earning professionals who are investing £20,000 to £50,000, meaning they have portfolios of at least £200,000.”