Pictured: Sarah Moss

Although individuals across the country are pledging to better manage their finances in 2012, few of these New Year resolutions involve making the most of the myriad tax reliefs and incentives to which many of us are entitled.  

Sarah Moss, Tax Services Partner at PKF Accountants & business advisers, explains how to make your income, savings and investments go further with half a dozen top tips:

Spend time to save money 

Many people don't invest enough time keeping track of their financial situation and, as a result, miss out on some of the tax reliefs available to them. For example, it is common for higher rate taxpayers (anyone with annual taxable income of over £42,475 will pay some higher rate tax) to fail to claim the additional 20% tax relief they are entitled to in respect of their pension contributions or gifts to charity. Spending more time investigating the options available to you could prove to be a sound investment in the long run.

Use your allowances

Make sure you use up tax-free allowances such as the annual capital gains tax exemption and ISA allowances. For example, following the launch of the Junior ISA, a couple with children aged 12 and 14 can benefit from four ISA allowances and invest up to £28,560 into a tax-free savings wrapper. 

Check the paperwork

HM Revenue & Customs (HMRC) has admitted to making mistakes with the PAYE tax codes of millions of workers and pensioners in the past few years, making it essential for individuals to carefully check any paperwork that HMRC sends them. For example, if you are a higher rate taxpayer and have some investment income, it is likely that there will be an adjustment in your tax code to collect the higher rate tax due on it. But if your taxable investment income has fallen (as interest rates have declined or because you have switched the funds to an ISA) you will end up paying too much tax during the year unless you ask HMRC to change your tax code. 

Keep your assets working for you

Even in these tough times, some businesses will do better than others. So, if some of your investments are not performing as well as others, take expert advice on offloading the poor performers and reinvesting in potentially more successful areas.  Be careful, however, as a switch may trigger a capital gains tax liability.  

If you own a property that you don't use, consider letting it out: you will have to pay tax on the rent (HMRC looks out for individuals who own several properties) but at least it will be giving you some return. If you have unused rooms in your house, consider taking a lodger - you can receive rents of up to £4,250 a year tax-free under the rent-a-room rules.

Charity starts at home

If you are planning to help children or other members of the family, make sure you do so in a tax-efficient manner. If you have already put savings in your children's name, you will be liable to tax on any return over £100 a year, so consider transferring the funds to a tax-efficient Junior ISA. Take specific advice on using trusts, as some can now suffer tax at 50% on annual income over £1,000.

Another year closer to your pension?

Possibly not, if you are not putting enough into your pension fund. While it may be tempting to cut back on long term savings such as pensions, individuals should consider taking advantage of a government subsidy on retirement savings that could be under threat in the future. For the time being, tax relief remains available at your top rate of tax on the pension contributions you make up to a maximum of 100% of earnings or £50,000. For example, if individuals earning £55,000 a year pay in £10,000, their pension fund will get an additional £2,500 from the Government and they will get a refund or higher rate tax relief of £2,500 through their tax code. This means that £12,500 will be invested into the pension pot at a net cost of only £7,500.

For more information about PKF, please visit their website here: www.pkf.co.uk