5 positive and practical reasons for planning your finances as a couple

May 2022
Couple looking at finances
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You may be surprised to hear this (especially from your financial planner!), but the most important person to talk to about your finances is your spouse or partner.

Approaching your finances as a couple can increase your financial wellbeing and bring you both happiness and prosperity.

Read on to find out more about the financial advantages you can gain by planning your finances as a couple.
 
1. It's good for your relationship

The openness and honesty that comes with money conversations can be good for your relationship.

According to Royal London, 33% of people keep financial secrets from their partner.
 
And it’s not just debt people conceal. A fifth of people keep their savings pot secret, often because they believe their partner isn’t responsible with money.

If you’re in a long-term relationship, it’s important to be open about your attitudes to money and honest about your respective financial histories.
 
As well as strengthening your relationship, open communication can help you avoid difficult conversations, for example, if previous debt arises when you apply for a joint mortgage.

2. It can help you budget

Agreeing on your household budget as a couple will help keep your family finances in order and should help avoid arguments about where you are spending.

As well as your regular income and expenditure, your budget should include thinking about the future and saving and investing with your future goals in mind.

These could be:
•    Buying a house
•    Saving for your children’s future
•    A joint retirement plan.

Once you agree on your priorities, work out a budget – and stick to it. 

Remember to enjoy the money you have, too. By allocating some money to spend on luxuries and things you enjoy, you should find it easier to stick to your budget.

We can help you to formalise your goals and create a plan that works for you both. With sophisticated cashflow modelling, we can also work out what you need to do to reach your long-term objectives.

3. Working together could mean paying less tax

Another benefit of planning as a couple is that you can take advantage of your tax allowances more effectively.
 
Marriage Allowance
The Marriage Allowance lets a spouse or civil partner give some of their unused Personal Allowance to their partner.

The Personal Allowance is the amount of income you can receive before Income Tax is due. For the 2022/23 tax year, it is £12,570 for most people.

If you or your partner has an income below this threshold, whoever has the lower income can pass up to £1,260 of their Personal Allowance to the other. Doing this increases their Personal Allowance to £13,830, saving up to £252 in Income Tax.

To be eligible, you must be married or in a civil partnership and the partner with the higher income must pay Income Tax at the basic rate in England and Wales (or the starter, Scottish basic or intermediate rate of Income Tax in Scotland).

ISA allowance
Saving and investing as a couple can double many of your tax allowances and exemptions.

For example, using an Individual Savings Account (ISA) can be a tax-efficient way to grow your wealth.
 
Each tax year, ISAs have a subscription limit. In 2022/23 this is £20,000 for each adult and any returns are free from Income Tax and Capital Gains Tax (CGT).

By investing as a couple and transferring assets when one partner is nearing their ISA subscription limit, you could double your allowance to £40,000 and allow more of your capital to grow tax-efficiently.

Dividend Allowance and CGT exempt amount
Every individual can receive up to £2,000 in dividends in the 2022/23 tax year before tax is payable. By planning as a couple, you could use this allowance to transfer assets between you, and effectively take up to £4,000 in dividends tax-free.

Regardless of your earnings, individuals also have a CGT exempt amount, which in the 2022/23 tax year, is £12,300.

By working together with your spouse or partner, you can take a combined income of £24,600 from your investments free from CGT. 
This is on top of any investments you have in tax-efficient vehicles such as pensions and ISAs.

4. You can make the most of pension tax relief 

The tax relief provided by the government make pension contributions an incredibly tax-efficient way to save for your retirement. 

Your Annual Allowance means that, in 2022/23, you can save up to £40,000 (or 100% of your earnings if lower) into a pension tax-efficiently.

You receive basic-rate tax relief on your contributions. So, a £100 contribution only costs you £80. Higher- and additional-rate taxpayers can claim additional relief through their self-assessment tax return.

Because of the higher rates of relief, it can make financial sense to maximise contributions for the higher earner in any couple.

Plus, if one of you isn’t working, you can still contribute to a pension and benefit from basic-rate tax relief on your contributions. You can pay up to £2,880 into a pension each year and this will be topped up with basic-rate tax relief to £3,600.

5. It can bring you both peace of mind 

Few wish to dwell on the bit about “’til death do us part” in the marriage vows, but ensuring that you both have up-to-date wills is an essential part of your joint financial plan. 

If you pass away without a will, there’s no guarantee that your estate will be divided according to your wishes.

For example, if you aren’t married when you die, your partner won't automatically inherit your estate, even if you've lived together for years.
 
So, having a will in place can give you peace of mind. This can reassure you both that, should the worst happen, your partner won’t have to go through a lengthy legal battle for their inheritance.

We offer an online Will Writing Service to all our clients. Powered by Gosschalks solicitors, we collect your details electronically. Your information is then passed to the specialist team at Gosschalks who will pick it up and deliver a personal service to you.

Gosschalks have been preparing wills for more than a century. So, you know you’re in safe hands as they provide you with all the advice and direction you need to make the entire process as easy and hassle-free as possible.

Get in touch

To find out more about making the most of planning your finances as a couple and how we can help, please get in touch. Email clientenquiries@lebc-group.com or call us on 0800 055 6585.

This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

Tax levels and reliefs could change, and the availability of tax reliefs will depend on individual circumstances.

The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.

The value of investments and income from them may go down. You may not get back the original amount invested. Past performance is not indicative of future performance.

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