Can I avoid the capital gains tax changes?

Investors in employee sharesave schemes now pay CGT of 18%, rather than 5% or 10%, after chancellor Alistair Darling overhauled the regime from April 6.

Those with investments in the Alternative Investment Market and other unlisted shares, as well as farmland and holiday lets, are similarly affected, as are basic-rate taxpayers with assets such as second homes and shares listed on the main market — they will see their CGT rise from a minimum of 12% to 18%.

Not everyone is going to be worse off, though. Higher-rate taxpayers with non-business assets including second homes will see the minimum rate they pay drop from 24% to 18%.

Tom McPhail at Hargreaves Lansdown, an adviser, said: “For sharesave investors, one way of avoiding the higher CGT would be to sell off your shares year by year — taking advantage of your annual £9,600 CGT allowance — and then repurchasing them inside a self-invested personal pension. The dividends will then be paid into your pension, protecting you from further CGT.”

If you know your company share scheme is likely to mature with a big gain, transfer your shares into an Isa before you sell so they will be free from capital-gains tax.

What do the tax changes mean for my pension?

The cut in basic-rate income tax means millions of savers will receive a lower rate of tax relief on contributions, one of the big incentives of saving into a pension. From April 6, the basic rate of tax relief fell from 22% to 20%. On a £10,000 contribution the taxman will add £2,500 tax relief against £2,820 before the changes.

Higher-rate taxpayers with a personal plan will also receive £320 less in their pension, though they can still claim higher-rate relief via their tax return. Over 30 years that extra £320 would add another £1,800 to your pension fund, assuming average growth after charges of 6% a year.

Weren’t there some changes to trusts too?

Yes, families had until April 6 to change accumulation and maintenance trusts set up for their children, or they have to pay 6% a year in inheritance tax charges. Mike Warburton of accountant Grant Thornton said: “Children must be given access to the funds at 18 to avoid this tax.

“In reality though, they cannot spend what they don’t know they have, so some parents are setting up bare trusts in their children’s names when they reach 18, but just not telling them until later.”

Alternatively, make sure gifts into new trusts are below the inheritance-tax threshold to escape the charges, or are out of income.

Some wealthy people are setting up investment companies, rather than trusts, to transfer assets to children.

The beauty of giving shares rather than making an outright gift is that you can set up the company to put constraints on how your children or grandchildren will use their holdings.

What about car tax?

For many families, the changes to vehicle excise duty announced this year — but due to come into force in 2009 — will be a real killer.

However, some surprising cars will pay less. Owners of the BMW 5-Series 518d currently pay £120 a year, but by next year the bill will drop to £90. By 2010 the bill will be £95.

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