FAMILIES could save as much as £20,000 in tax this week if they get their affairs in order, ahead of the biggest overhaul of the tax system for more than a decade.

The 2007-8 tax year ends at midnight on April 5 and experts say that it has never been more important for households to make use of their allowances and reliefs.

On Sunday the basic rate of income tax will fall from 22% to 20% and the tax rate on capital gains will become a flat 18%. Hundreds of thousands of people could be worse off if they don’t act in the next few days.

Accountants are concerned many don’t even realise the savings they can make, because Revenue officials have been giving out misleading information, denying that legitimate tax saving strategies are allowed.

We have checked what is possible with the Revenue and top accountants. Here are five essential tax-planning tips that could help knock thousands off your tax bill.

1. Act on bank indexation relief and save £9,400

Long-term investors with assets purchased before 1998 are being warned that if they don’t act now, their tax bill could soar because of the removal of indexation relief.

This cuts the amount of tax paid to reflect the eroding impact of inflation. Suppose you bought shares worth £50,000 in 1982 and sold them today for £200,000. You would have a profit of £150,000, but when indexation was applied you would be treated as if you had bought the shares for £102,000 – reducing the taxable gain to £98,000.

Taper relief – another allowance that will disappear – means those on a higher rate would pay 24% on the £98,000 gain, or £23,520 if they sold on or before April 5, ignoring annual allowances. The tax bill would jump to £27,000 after that date as indexation and taper relief are replaced by a flat 18% tax rate on the full £150,000 gain.

You can prevent your tax bill rising by passing your assets to your spouse tax-free. As long as the transfer takes place this week the value of the assets when your spouse received them – the “base cost” – would be £50,000 plus the indexation allowance, in other words, he or she would be assumed to have acquired them for £102,000. If your spouse sold the shares for £200,000 in May, the taxable gain would be £98,000. At the 18% tax rate that’s a bill of £17,640.

This can benefit investors with property or shares. It may be too late to transfer property if you have a mortgage, though.

Scores of readers have contacted us to say their tax office has denied this is possible, but we have checked with the Revenue. It said: “Individuals can retain the benefit of indexation allowance by means of transferring an asset to their spouse or their civil partner.”

2. Sell some shares and save £4,000

Under the present regime investors in AIM, unlisted shares and other “business assets” benefit from an enhanced level of taper relief. This means that after just two years a higher-rate taxpayer pays 10% tax on profits. On a £50,000 gain that’s a tax bill of £5,000, ignoring annual allowances. From next Sunday, after taper relief is abolished, everyone will pay 18% on gains, a bill of £9,000.

If you are in this position, it may be worth selling your funds or shares, to benefit from the lower capital-gains tax rate, then buying them back. The rules say you must not buy the same shares and funds within 30 days, or the sale doesn’t count for CGT purposes.

However, you are allowed to “bed and Isa” them. You sell the shares and buy them back straightaway using cash in an investment Isa. You’ll pay tax on any gains made so far, but at a lower rate than after April 5 – and any future growth will be tax free.

If you’ve already used your Isa allowance, another option is to sell the shares and buy them back via a self-invested personal pension. This is known as a “bed and Sipp”.

Another alternative is to sell them into a trust, set up on your behalf. This is deemed to be a sale under CGT rules so you trigger a tax charge on gains you have made so far.

3. Save £4,200 with an EIS

If you have recently sold main-market shares and are liable for CGT on profits above your annual allowance (£9,200 this year), you could invest the proceeds in an enterprise investment scheme to defer the bill.

EISs allow you to defer CGT from the previous three years, or the subsequent 12 months. You will be liable for CGT when the EIS shares are sold, but you could offload them gradually to use up several CGT allowances.

By deferring the payment investors can also benefit from the new 18% flat rate of CGT. The maximum rate of CGT this tax year is 40%. On a £10,000 taxable gain that’s a bill of £4,000. By deferring the payment using an EIS so that the payment is due under the new 18% tax regime (a bill of £1,800) you save £2,200.

EISs also qualify for income-tax relief at 20% on investments up to £400,000. On £10,000 that is a saving of another £2,000.

The schemes are high risk as they invest in small unquoted firms, but managers have launched some that limit the risks.

4. Top up your pension and save £1,800

The cut in basic-rate income tax comes witha sting in the tail because 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 on pension contributions will fall from 22% to 20%. On a £10,000 contribution the taxman will add £2,820 relief to your pension this year. If the same contribution is made next Sunday you will receive just £2,500.

Higher-rate taxpayers with a personal plan will also receive £320 less in their pension from next week, though they will still be able to 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.

5. Use your Isa allowance and save £2,800

You can invest up to £7,000 in an equity Isa this tax year and the returns will be tax-free. The maximum investment in a cash Isa is £3,000. If you do not invest by Saturday, this year’s allowance is lost for good.

A £7,000 investment would turn into £22,500 after 20 years, assuming 6% growth after charges. Outside an Isa you would pay tax of £2,790 on the £15,500 gain, assuming an 18% tax rate and that you had used up your annual CGT allowance. Inside an Isa all growth is tax free.