Tax doesn’t have to be taxing they say. Yeh right, we believe you!

Of course it´s taxing – it´s a pain in the bum. Anything to do with tax is a pain. Ugh. Horrible thing and such a nuisance to deal with. Even if you’re possibly up for a tax rebate (always a lovely surprise) the forms are still a nuisance to fill in.

However, miserable subject though it is, the most miserable part is actually paying it. So the best thing is to the bite the bullet now and do what you can to avoid paying any more than you have to.

Start putting money into ISAs and pensions now to make the most of the tax saving. Remember, you´ve got up to £10,200 you can put in a full equities Isa this tax year (April 2010 – April 2011) so use as much of it as you can. I put the full amount (if I´ve got it) into a shares-based Isa because in the long-run I know it´s going to do better than cash. I usually put it in either an index-tracking fund or an Exchange-Traded Fund (ETF) because they´re cheap and they generally work.

This year I´m thinking of putting it into an ETF that tracks the Brazilian economy (you can do that with ETFs – follow an entire country) – but that´s just me!

However, if you´re not sure about shares or tracking entire countries with your heard-earned, you could hedge your bets and put just £5,100 in a shares Isa and then another £5,100 in a cash Isa. We´ve got a run-down of the best cash Isas here. None of them is exactly stunning right now but the tax-saving is still a bit of an incentive.

Also, now is a good time to consider topping up any pensions you currently have. Again, you can save a lot of tax by putting money into a private pension – ideally a stakeholder or a Sipp.

I like stakeholder pensions on the whole because they´re cheap (their charges are capped at 1.5%) and they´re a lot more transparent than the usual, overpriced and underperforming private pension funds. You might (understandably) be against pensions generally but think about the tax saving. The government puts in the tax you would have paid on any money you put into your pension. That´s not to be sniffed at, particularly if you´re a 40% tax-payer. At least it means your tax money is going to a good cause…you…rather than being wasted on the dumb ideas our MPs keep dreaming up.

Also, now that the pensions rules have changed, you can put as much money as you like into your pension pot each year (up to an annual allowance of £245,000 for this year) so, for most of us, that means no limit.

Another type of pension you should be considering is a Sipp. I say considering cos it´s not for everyone. It´s basically a pension ´bag´into which you put all kinds of investments that you choose such as shares, bonds, commercial property and others. You can do it all yourself or you can get others to do it for you – others like Hargreaves Lansdown and Chartwell.

Don´t forget, too, that you can give away up to £3,000 as gifts each tax year and that money won´t be subject to inheritance tax.

Also, there´s the lovely Capital Gains tax which you pay if you sell an asset and make a profit on it. The threshold for that in this tax year is £10,100 and anything you make over that is taxed (apart from things you sell that are worth £6,000 or less, or your own home). However, you could reduce your Capital Gains bill by putting some investments into the name of your spouse. This is also helpful for savings if one of you is not earning and, therefore, hasn’t used up their tax allowance.

There’s more helpful tax advice on the marvellous Directgov website (one of my favourites…yes, I am that sad) and on the FSA’s website Moneymadeclear. Check ‘em out!