Investors are in the last chance saloon as the election looms and the tax year ends

I am talking to you from the last chance saloon. Last chance, because next week sees the last four days of the 1996/97 financial year. Act now and mitigate your tax or the opportunity will be lost. If there is a change of government, that loss could be more expensive than you imagine.

Like most sensible people, you have probably already taken all the action that is needed. Capital gains tax? Profits of pounds 6,500 are allowed free of tax each year. And don't forget the indexation allowance. The stock market has been buoyant during the past 12 months, so equity investors should have no difficulty eating in to this annual exemption.

Personal equity plans? Actually, it is worth focusing on PEPs, as in just a few days you will be able to buy the 1997/8 issue. PEP providers are falling over to encourage investors to take full advantage of next year's allowance ahead of the election.

More important is the fact that 1997/8 offers an unparalleled opportunity to channel money into tax-free investments. Unparalleled, that is, if you fortunate - or foresighted - enough to have tasted money with one of the demutualising building societies or to be a policyholder in Norwich Union or Scottish Amicable. The free shares these companies will be dishing out to their members offer an opportunity for legitimate tax avoidance.

Inland Revenue rules allow you to transfer new shares into a PEP at no cost within 42 days of issue. These shares are deemed to be received at a nil cost. This means that if you sell them, you are potentially liable to CGT on the whole of the sale proceeds.

But if you put them into a PEP, any gain is sheltered. More important, with nil cost, they use nothing of your annual PEP allowance. Imagine what this means. You are allowed to put pounds 6,000 into a general PEP each year. Be lucky enough to own several of these free issues, and you can divert several thousand pounds of potentially profitable investments into your PEP - and still invest pounds 6,000. It may not be what the Government had in mind, but it is a tax planning exercise worth considering.

Of course, nothing is ever as straight-forward as we would hope. The rules on PEPs are tightly drawn. You are only permitted to take out one PEP each year with a plan manager. So if your building society or life assurance company woos you with a PEP offer, remember it may restrict your ability to put more money into your 1997/8 PEP or transfer other free shares into this tax-free pot.

A number of PEP plan managers are able to provide the type of PEP that is sufficiently flexible to accommodate this potential tax bonanza. Many stockbrokers (my own firm included) have self-select plans available that would permit the sweeping up of these free shares and allow the injection of the extra pounds 6,000. You may not get relief on the way in as you do with pension funds, but this provides about as tax-efficient an investment fund possible

We are probably near the end of the building society bonanza. Those aiming to turn themselves into banks have done so or are well-advanced in their plans. The champions of mutuality have also, by and large, nailed their colours to the mast and are increasingly handing back their profits in the form of cheaper mortgages or better investment returns.

The fun is far from over in the insurance world, though. Scottish Amicable's announcement that it was to float on the stock market soon flushed out the predators. It it clear that the appetite for these mutual insurers almost certainly exceeds their availability.

Carpetbagging in the insurance industry is not as simple as with building societies - the commitment is rather greater.

Still, with Norwich Union policyholders likely to pick up an average of over pounds 1,000 worth of shares, the opportunity is not to be sniffed at.

Brian Tora is chairman of the investment strategy committee at Greig Middleton, stockbrokers (0171-392 4000)