So whose cash is it, anyway?

We All complain about the amount the taxman takes out of our wages, salaries and benefits. The same is true of the interest and dividends paid to millions of savers and investors.

Yet many of us fail to manage our savings in the most tax-efficient manner; we don't even exploit the tax allowances that can be legitimately claimed. With the advent of self-assessment, this situation could become even worse.

So perhaps we should stop moaning for a moment and ask the question: am I saving for my benefit - or the taxman's?

Before you start to pay for professional advice - from an accountant and, perhaps, an independent financial adviser - here are some of the areas to consider in organising your tax affairs.

Marriage and tax

Nowadays, husband and wife can elect to be taxed singly on their earnings, with both eligible for the single person's allowance. If the wife does not have any earnings then the husband can claim the married allowance. While this is only pounds 1,790 a year, on which tax is allowed at the special 15 per cent rate, it is still worth having.

The old differences in taxation between earned and unearned income have long gone. Before paying tax, a person has to earn over pounds 3,765 a year. If your husband or wife has minimal or no earnings, it is worth while putting investments and deposits in their name. If they do not pay tax, they can have their investment income paid gross up to the threshold.

Just ask a building society or bank for the form that has to be signed to ensure that interest can be paid gross. The Inland Revenue says that non-taxpayers fail to reclaim around pounds 500m a year that they need not have paid, much of this on building society deposits.

Pensions

Depending on age, as much as 25 per cent of income can be put into a company or personal pension plan and offset at the individual's top rate of tax.

Anyone with a personal pension can make use of tax allowances on authorised contributions for the previous seven years if they failed to invest the full amount. So a top-rate taxpayer who earns a large bonus, for example, can invest it in a personal pension scheme and mop unused allowances from previous years at his or her highest rate of tax.

Long-term savings

Personal equity plans (PEPs) and tax-exempt special savings accounts (Tessas) have become topics for everyday conversation because they are both simple ways to invest for the future without paying tax.

In recent years, the Government has tried to encourage long-term investment. Anyone prepared to deposit money for five years in a Tessa will receive a much more attractive gross rate of interest than with a conventional deposit.

Now we are in a period of low inflation, the rate of interest paid on conventional deposits with building societies and banks is under 2.5 per cent. If the money is invested for a year with the Halifax, for example, the interest paid is still only 5.75 per cent gross. With a Tessa, the interest is 5.4 per cent tax free. Anyone reinvesting the proceeds - up to pounds 9,000 - from a previous Tessa will receive a fixed rate of 6.77 per cent net.

PEPs are one of the best tax- free vehicles and can be used as part of an efficient retirement plan. Up to pounds 6,000 a year can be invested in UK shares or unit trusts, on a lump sum or regular investment basis, through a variety of PEP schemes - or pounds 1,500 if the investment is largely overseas. A further pounds 3,000 can be invested in a single company PEP.

A PEP's'main attraction is that if it is held for a year or more, all the income and capital gains are tax free. In addition, husband and wife can invest the full amount individually.

Gilts and National Savings

Apart from the Pensioners Bond that was introduced recently, a variety of investments offered by National Savings are tax free if held to maturity. Quite often, these offer better rates of interest than long-term fixed- interest investments from banks and building societies. Also, investments in gilts are free of capital gains tax if held for longer than a year.

Insurance

People aged 60 or more can now receive tax relief on premiums for health insurance. Although the rates can seem expensive, the problems in the National Health Service in many parts of the country may make this seem worthwhile.

Permanent health insurance pays out an income in the case of long-term illness or accident. While medical insurance such as that offered by Bupa is a taxable benefit, the taxman has left permanent health insurance alone. Try to persuade your employer to introduce a group scheme; the premiums are less than the individual would pay and they are tax free.

Inheritance tax

One of the reasons for amassing wealth is to pass on the benefits to heirs. An estate worth up to pounds 200,000 is free of inheritance tax. Anything above this, however, is taxed at 40 per cent.

With widespread insurance cover, resurgent house prices and death-in- service benefits of up to four times' salary offered by some firms, an increasing proportion of the working population could find their estates liable to inheritance tax.

There are various ways of minimising the impact of inheritance tax, including making regular gifts and writing insurance policies in trust. Anyone who thinks this tax could cause a problem is well advised to consult an independent financial adviser.

The above are just some of the ways to use the tax system efficiently. Self-employed people working from home should use an accountant to ensure they are claiming everything they are entitled to.

Always remember that while tax evasion is a crime, tax avoidance is using the system efficiently.