Knowing how to plan your finances to ensure that you are not paying unnecessary tax can be tricky.

Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants, says it is hard for people to gain a picture of what allowances are available to them and how they can utilise their particular circumstances.

Anita Monteith, tax manager at the Institute of Chartered Accountants, says it is extremely common that people don’t realise they are paying unnecessary amounts of tax. “The classic groups doing this are children and pensioners,” she says. “Anyone who does not pay tax but who has a bank or building society account should not pay tax on the interest they accrue, but many do.”

“Utilising things like the nil rate band and spousal asset transfers is a perfectly legitimate way to minimise tax payments,” says Roy-Chowdhury.

Experts say there are tens, perhaps even hundreds, of millions of tax pounds, unclaimed or paid unnecessarily. And although HMRC is constantly trying to reduce the technical language used when talking about tax, it can still seem complicated. However there are a few universal areas of tax planning that can be considered by everyone.

Can I reduce the tax I pay on my savings?

One of the simplest and most popular ways to save money tax free is to get an Isa. Personal allowances for Isas are currently £7,000. Anyone over the age of 18 can put money into an equity Isa while over-16s are eligible age for cash Isas.

Non-taxpayers, such as children and pensioners, should make sure they fill out a R85 form at their bank or building society declaring they are not paying tax, otherwise the interest will be taxed automatically.

How else can I use tax planning to help my children?

Every child born since September 2002 is entitled to a £250 voucher to set up a Child Trust Fund. “It’s a good idea to exercise your choice over where the money should be invested,” says Monteith. “You can pay in an additional £1,200 a year to the fund, which is held in a tax-free environment.”

How do gifts work?

Making gifts is a good way of reducing the future inheritance tax liability for your beneficiaries. Up
to £3,000 a year can be made without incurring IHT and parents can give £5,000 each on a child’s marriage. You can also make any number of small gifts of up to
£250 a year. It is also possible to make regular gifts out of income exempt of tax. You need to prove that the money is coming out of your income, rather than your capital, and that you have enough income to live on without it.

How else can I transfer money to reduce IHT?

You can transfer property and gifts to your spouse without incurring IHT. A popular way for people with assets worth more than the IHT threshold (currently £285,000) to reduce the IHT bill is through “nil rate band discretionary” trusts. These allow couples to make use of both their individual £285,000 exemptions: once when the first partner dies, and again when the second dies. For more details on nil rate band discretionary trusts, see www.ft.com/beginnersguides.

Are there any benefits to transferring money to my spouse?

Couples can move assets between themselves without paying tax. Recently the rules have been extended to include single sex couples in a civil partnership.

Each spouse has an annual capital gains tax exemption of £8,800. Therefore CGT, which is triggered by, for example, the sale of a second home or shares, can be reduced by transferring assets to your spouse before they are sold. “If you are married you have over £17,000 in exemption,” says Roy-Chowdhury. “If your gain is above that amount, then it’s also a good idea to make sure that the spouse in the lowest tax band has the rest of the asset in their name.”

Are corporate perks costing me more than I gain?

If you work for a company which gives employees perks such as company cars, computers and mobile phones, check whether you are paying tax on them and if so how much. A company car is taxed at a rate dependent on its price and CO2 emissions. If these are high it could be more economical to buy your own car.

Can I take advantage of personal allowances if I am self-employed?

One of the first things to do, says Roy-Chowdhury, is to file your self-assessment form on time. If Revenue & Customs does not receive your form by January 31 2007 it will charge interest. Second, consider paying money into a stakeholder pension.

What’s the most tax-efficient way to donate to charity?

If you are a higher rate tax payer you can claim back money given to charity, through Gift Aid. This ensures that the charity gains 28 per cent in tax for any money given. If you are a high rate taxpayer you can also claim back the difference between the basic and higher rate.

If you donate cash to a charity it is up to the charity to claim back the 28 per cent, and up to you to claim the difference between the higher rate and lower rate in your tax return.