Times are taxing. With record inflation — driven by soaring food and fuel costs — and huge increases in the cost of servicing mortgage debt, consumers are feeling the pinch.

There are, however, some great ways to make your finances tax efficient — and help protect you from the credit crunch.

Do you have a mortgage? Run your own business? Have a second home? Children at university? Drive a company car? Then read on.

Get tax relief on your mortgage interest

Mortgage repayments take up a large chunk of the average household’s outgoings. Successive governments have cut or abolished tax relief on mortgage interest payments, but with a little clever planning your debt can work for you, particularly if you run your own business.

Take, for example, a married couple with a £200,000 mortgage and other debts of £50,000. The husband could sell his wife £250,000 worth of shares in the private family company.

She takes out a loan to meet the cost and her husband uses the proceeds from the share sale to clear their mortgage.

Because his wife has borrowed the money for the qualifying purpose of acquiring shares in a private family firm, the full amount of interest on the borrowing qualifies for tax relief at her highest marginal rate. In other words, interest repayments can be set against their other income, potentially making them big savings.

There is no capital-gains tax (CGT) to pay on share disposals from husband to wife under the “inter-spouse exemption” rule.

Ease the cost of sending children to university

A new generation of students is about to embark on higher education and many parents will be thinking of investing in property in university towns.

With a little foresight, they can meet the bulk of the cost out of tax savings on a buy-to-let property — leaving any capital appreciation untouched.

It might sound too good to be true, but is easily achievable.

If you have a son or daughter over the age of 18 attending university, you could think about buying a student flat on the basis that you will own 99% of the property, with your student child having the remaining 1%.

You could then enter a formal profit-sharing agreement with your offspring so the profits from letting go to them. These will then be taxed at their low or nil rate of tax (depending if they have any income), instead of you at up to 40%. This virtually tax-free income can then help fund them through university.

For example, if you had a £200,000 student property with a net yield of say 5%, providing a income of £10,000 a year, a higher-rate taxpayer would save up to £3,087 on that income.

Avoid capital-gains tax on your second home

Profits made on sale of your principal private residence are free of tax — but this is not the case with holiday homes or buy-to-lets, and with many people selling out before the housing market downturn gets any worse they face a hefty tax bill.

Gains here are subject to CGT at 18%, but with a few simple steps you can avoid this.

If you lodge a “principal private residence” (PPR) election with the taxman within two years of acquiring a second home, you can vary this at any time in future in favour of another property.

Say a couple have a main residence in London and buy a holiday cottage on the coast, they could elect their London property as their PPR. If they made

a healthy profit on the sale of the holiday home five yeas later, they could vary the election in favour of that property and immediately vary it back again to the main residence in London.

“The actual variation could be for a very short period of time, say one week,” said Ronnie Ludwig at accountant Saffery Champness.

In the above example, three-fifths of the gain on the coastal property would be exempt, with a loss of only one week’s exemption on the London home. The annual CGT exemption of £9,600 (£18,400 for a married couple) will reduce the tax bill further.

Enter the holiday lettings market

There is more good news if a second property can be set up as a “furnished holiday letting” — ideal for those who do not want to or are struggling to sell in today’s market.

To count as this, a property must be available to let for at least 140 days in the year, let for a minimum of 70 days and not be let to the same person for more than 31 days.

Such properties receive favourable CGT and inheritance tax (IHT) treatment. As long as the “business” is run for at least a year, you’ll qualify for “entrepreneur’s relief”, announced in November, where the first £1m of capital gains are taxed at 10% instead of the usual flat rate of 18%.

After two years, the property could also fall outside your estate for IHT purposes.

Buy and run your car tax efficiently

With petrol prices soaring, hard-pressed motorists are looking for ways to cut the costs of driving.

Those who use their car for business purposes receive up to 40p per mile from their employer, an allowance set by the Revenue since 2002 — despite the AA putting the current cost of running a car at 59.4p per mile at least.

If you have a company car, you will be taxed on this “benefit in kind” — on the use of the car and fuel.

“If you’re given free petrol for your company car that covers private mileage you need to work out whether there’s a real benefit,” said John Whiting, a tax partner at Price Waterhouse Coopers. “For many people, it hasn’t been tax efficient: the tax charge outweighed the real benefit of the fuel, so it was better to decline the fuel or reimburse the employer with the full cost. But with petrol prices shooting ahead, it’s worth looking at this again.”

To reduce the tax levied on the use of the car, you could think about taking part ownership (up to £5,000 is allowable).

Going green is another option: company cars with lower CO2 emissions attract benefit-in-kind charges as low as 10% of the value of the car, compared with up to 35% for the most polluting models.

If you own and run your own family company, 100% tax relief on the cost of the car is available on those with low emissions, whereas more polluting cars attract relief at just 20%, capped at £3,000.

The club owner

For Brian McKenna, entering the holiday lettings market was a no-brainer. The snooker club owner, 47, was feeling the pinch from the rising cost of living and decided to let out a two-bedroom home he owns with his wife Rachel, 37, in Plymouth's Royal William Yard.

McKenna wanted to retain the 1,300 sq ft property, used for family holidays throughout the year, but decided to make it work for him financially. The Plymouth Hoe property had been leased on a long-term basis, but McKenna hopes that letting it out for short breaks for about six months of the year will net him the same income as he received for a year’s long lease.