Never make an investment you would not make otherwise just because it will save you tax.
It sounds commonsensical enough, wise, indeed. There is no comfort in dodging the tax then losing the money because the investment is a dud, or someone steals the money. Yet, as with most old saws, plenty of people who do the opposite seem to do quite nicely.
In real life it depends on the tax, as well as the investment. Before Nigel Lawson ordained that nobody should suffer income tax at more than 40 per cent, the unfortunate few who paid more than half the top slice of their income in tax went to extreme lengths to keep it for themselves. Those were the days the Channel Islanders got rich.
At first 40 per cent seemed barely worth dodging. Chancellor Lawson found himself collecting more income tax, not less. That is no longer so, certainly not to the same extent.
Even before Gordon Brown stealthily lowered the starting point for the 40 per cent rate - by raising it by less than earnings - PEPs attracted colossal sums from people who would never have invested in equities without a tax break. That was before the bear market that coincided with Mr Brown's stingy move to scrap the tax relief on PEP and ISA dividends. Now the only tax "privilege" on equity PEPs and ISAs is that you pay no gain tax - but you don't anyway unless you cash in profits of more than £8,500 in a single tax year.
Inheritance tax may be another matter, thanks to the house price explosion. You can walk down long suburban streets in the West Midlands where every house is worth more than £275,000 - potentially liable to 40 per cent IHT. Mr Brown claims only a tiny proportion of estates pay it. That is because the taxmen's records are out of date and bequests between spouses go tax-free.
For whatever reason, John Cadwallader, who runs the Birmingham office of the stockbrokers Brewin Dolphin, reports lively interest over the past couple of years in a scheme they have devised to shelter investments from IHT. The money is invested in a portfolio of shares on the Alternative Investment Market. These count for tax purposes as "business property". After two years they escape IHT altogether and you keep control over your investment.
It sounds too good to be true. So it is, say critics of AIM. Shares on this lightly regulated market can be risky. They can also be hard to sell, which may be a pain for your executors.
Mr Cadwallader replies that the risk is mitigated by spreading the investment across a portfolio and not taking chances in pursuit of a dizzy investment performance: "We don't try to shoot the lights out". Also, quite substantial companies bringing their shares to market nowadays are opting for AIM, rather than the main market. AIM is no longer a fringe activity.
One catch: you don't get much of an income. Many AIM shares pay no dividend at all. Remember, too, Mr Brown doesn't like IHT loopholes. Earlier this year he slammed shut all the popular ones - retrospectively, in one instance back to 1984.