The seemingly relentless progress of the UK stock market came to a brief halt at the beginning of last week. Just as the FTSE 100 pushed through 5900, galloping towards 6000, it was stopped in its tracks. A fall of 84.9 points in 48 hours wiped over £21bn off share values.

Bear in mind, however, that the value of the FTSE 100 is about £1,452bn. The fall in value, which sounds large, did not cause much alarm as the market has been adding this level of value over similar 48-hour periods.

Although the market subsequently recovered, what happened to that value? A simplistic answer is that the FTSE 100 is a measure of capital values, and adjusts for the issue of dividends.

Last Wednesday, both Lloyds TSB and Royal Bank of Scotland went ex-dividend. This means that holders up to that date are entitled to claim big dividend payouts. Lloyds will pay out £1,317m at the start of May, and Royal Bank £1,690m at the start of June.

Put together, the big four banks will pay out more than £6bn, enough to buy Sainsbury's, to put this into context. As the big money invested is from institutional pension funds, as a generalisation, this will have to be reinvested back into the market. This £6bn will be arriving in a five-week period, and the sheer weight of money has the potential to push the UK market even higher.

The month of March often sees a higher level of activity in the stock market. The capital gains tax exemption allowance for an individual this tax year is £8,500, up to April 5. As nobody likes paying tax, this is a valuable opportunity to realise gains, to ensure that investors are not left with potential liabilities in the future.

Obviously, funds raised in realising the gains tend to be reinvested back into the market, accounting for the higher market turnover.

Gains are more of a feature this year than in previous years. Any investments made over the past three years, should have performed very well, and the downside to making good profits is the potential liability to tax, if the profits exceed the allowance.

A factor this year has been the high number of takeovers. These are usually made at a significant premium to the existing market price.

A cash-only takeover has the chance of creating a gain in excess of the allowance, so careful tax management of a portfolio is an essential skill that a stockbroker takes on board.

The best way of sheltering gains on equities is buying them in an Individual Savings Account, more usually referred to as an ISA. There is a misconception that ISAs are always invested in unit trusts.

Although higher risk, investing into a portfolio of individual shares in an ISA has the potential to supply a higher level of performance.

Sensible gains management involves taking out an ISA each year and, if appropriate, switching investments out of a taxable environment into an ISA, being a tax-efficient environment.

The smart money initiates an ISA in April or May of a new tax year. As is always the case, however, many leave things to the last minute - "Oh, I have just remembered, I must use my CGT and ISA allowances!"

* For investment advice contact Anthony Platts on 01642 608855.