HAVING £1m in assets has its downsides as the taxman will want his share, but a couple could shelter an astonishing £314,000 from income and capital-gains tax (CGT) if they used all their allowances.

Few people realise quite how much they could shelter. In addition to their £14,000 Isa allowance, which rises to £14,400 next year, a couple could salt away an astonishing £300,000 in tax-free plans from National Savings & Investments (NS&I), the government-backed agency.

Everyone can put £15,000 in each of its four tax-free savings certificates and there are usually two issues every year – a total allowance of £120,000 each. You could then put another £30,000 each in premium bonds.

However, advisers suggest you use only the two index-linked savings certificates as these offer the best returns, but as there are two a year that still allows a couple to shelter a total of £60,000 tax free.

Index-linked savings certificates are not only tax-free; they also protect against inflation and offer one of the best deals around for higher-rate taxpayers.

The return is made up of a set rate of interest plus retail price inflation, fixed for three or five years. Both the three-year and five-year certificates are paying RPI plus 1.35% – this equates to 5.75% and is equivalent to a rate of 9.58% for higher-rate taxpayers and 7.19% in the basic tax band.

If you are happy to take more risk, you can also shelter your savings from income and CGT in venture-capital trusts and enterprise-investment schemes. With an EIS, you get 20% income tax relief on investments of up to £400,000, and you can defer CGT on gains from other investments if you roll them into the scheme. Capital gains from the EIS itself are also exempt from tax, and the money falls out of your estate for inheritance tax purposes after two years.

However, EISs are high risk as they invest in unquoted companies and usually back just a handful of firms. This also makes them potentially difficult to quit in a hurry.

It is easier to sell holdings in a VCT because they are listed companies, though to benefit from the tax breaks, you must invest for at least five years.

VCTs give 30% income tax relief on up to £200,000 a year. Any dividends from the VCT do not face higher-rate tax and profits are free of CGT. VCTs are still risky because firms can have no more than 50 staff and assets of £7m.

While all the investments above grow tax-free in your lifetime, your heirs will have to pay inheritance tax at 40% above the individual allowance – £300,000 this year – on some of the investments, such as Peps and Isas, when you die.