Marriage offers perfect opportunity to maximise your money while minimising tax payments THE ECONOMIC gloom is likely to linger in 2013, with household finances remaining under the cosh. However, you can use the tax system to turn the downturn to your advantage over the coming year. Sell to your pension fund There are well-publicised tax advantages in topping up your personal pension scheme with an injection of cash. You can get tax relief up to 62.5 per cent of the cash injected if you're a top rate taxpayer, and lesser but still very worthwhile reliefs if you pay income tax at a lower rate. But what about those of us without a lot of cash sitting in the bank? As an alternative, it may be possible to transfer an asset into your personal pension scheme in lieu of cash. Most types of asset are acceptable in pension schemes, with the exception of residential property. For example, say you own an asset that you may have purchased a number of years ago at £15,000, but which is now worth just £10,000. You could transfer this into your pension scheme at its current market value and, in so doing, create for yourself a capital loss of £5,000 that you can use to offset any personal capital gains you make in future. The major benefit, however, is that the pension fund can then gross up the value of the asset you have transferred by the basic rate of tax to £12,500, and effectively reclaim the £2,500 from the government, producing a pension pot of an asset worth £10,000, plus cash of a further £2,500. If you are a 40 per cent taxpayer, you can get a tax reduction of up to a further £2,500, or £3,750 for a top rate 50 per cent taxpayer. In effect, therefore, a 40 per cent taxpayer will have secured tax relief of £5,000 on a £10,000 contribution, while for a top rate taxpayer the relief increases to £6,250. The additional benefit is that all future growth in value will accrue tax free within your pension fund. Consider an offset mortgage Interest rates on bank deposits are now pretty pathetic, ranging from zero to 2 or 3 per cent at best. However, if you have cash available in the bank and are also paying a fixed-rate mortgage at a rate higher than 1 per cent, you could ask your bank to set up an offset arrangement, whereby you do not earn any interest on your deposit, but neither do you pay interest on an equivalent amount of your mortgage. Getting married? If marriage is on the horizon, a few pre-wedding (or civil partnership) steps could result in a significant tax advantage for the future. Many investments have suffered badly in the recession and values have fallen sharply, but this could be turned to advantage for those about to get married. It may be possible to create a capital loss by transferring property between themselves by way of a gift prior to the date of marriage. This is because where two individuals who are not connected with each other transfer assets between them, the transfer is deemed to take place at current market value. Consequently, if you are about to get married but had previously purchased an asset for, say, £10,000 which is now valued at only £6,000, you could gift this to your future spouse now as an advance wedding present. In that case, you would be deemed to have "sold" the asset for £6,000, thereby creating a capital loss in your hands of £4,000. Once married, your spouse would continue to own the asset gifted and you will have a £4,000 capital loss that can be used against any future gain arising on the sale of any assets. Following marriage, a husband and wife can transfer assets between each other on a tax-free basis such that the spouse with the loss can use this to offset any gains arising on sale. This is just a selection of the many ways in which it might be possible to turn the economic gloom to your advantage. Professional advice should always be taken before implementing any such strategies.