4 helpful tips for financial planning as a couple

If you and your partner keep your finances separate, you could be missing out on opportunities to strengthen your relationship and save more tax-efficiently.

Research published by Aviva has revealed that 2 in 5 people in a relationship in the UK admit to “financial infidelity” (being secretive about their personal finances) and 26% of respondents said they bicker about money at least once a week[1].

This could potentially put a strain on a relationship, whereas planning your finances together may offer a host of benefits such as improved communication and sharing complementary financial knowledge to achieve your goals.

If you’re unsure about how to plan your finances as a couple, here are four helpful tips.

1. Communicate openly and honestly

You and your partner may have different attitudes and beliefs about money and how to manage your finances.

Communicating openly and honestly about your finances might help you both understand each other’s money mindset. And, by making sure you’re both on the same page you could reduce the risk of misunderstandings and disagreements.

You might feel awkward talking about money at first. If so, it may be helpful to consider the following:

• Choose a quiet place where you both feel comfortable talking
• Agree to talk when you both have plenty of time and don’t feel rushed
• Set clear expectations for the discussion so neither of you feels blindsided
• Focus on the future rather than past events and behaviours.

The more you talk to your partner about money, the easier it’s likely to become.

2. Make the most of tax allowances and tax relief

You could potentially reduce your combined annual tax bill by taking advantage of the following tax allowances and tax relief.

Marriage Allowance

You may be eligible for this if you’re married or in a civil partnership and one of you earns less than the Personal Allowance, which is currently frozen at £12,570 (2023/24).

This allowance enables the lower earner to transfer up to £1,260 of their Personal Allowance to their spouse or partner, which could reduce their tax bill by up to £252 for the tax year.

Maximise contributions to the higher earner’s pension scheme

You can each receive tax relief on pension contributions up to your Annual Allowance, which is £60,000 for the 2023/24 tax year.

It’s possible to make third-party contributions to someone else’s pension and the amount of tax relief awarded depends on the pension holder’s rate of Income Tax.

So, if your partner is a higher-rate taxpayer and you pay the basic rate, it might be beneficial to pay into their pension because contributions will attract higher-rate tax relief.

Alternatively, if one of you isn’t currently earning, it’s still possible for you to contribute up to £2,880 a year to their pension. Tax relief will top this up to £3,600.

Use both your ISA allowances

You each have an annual ISA allowance of £20,000 (2023/24) and making the most of these allowances could help you to save in a more tax-efficient way as a couple.

This is because any money you hold in an ISA is sheltered from both Income Tax and Capital Gains Tax (CGT).

So, if you have a Cash ISA, any interest you earn is free of Income Tax. And, if you have a Stocks and Shares ISA, your savings will be free from Income Tax on investment returns and dividends. Also, you won’t pay Capital Gains Tax (CGT) on any profit you make when selling investments in your Stocks and Shares ISA.  

So, if one of you has the capacity to save more than £20,000 within the tax year, topping up the other person’s allowance could be a good idea. Working together, you could save up to £40,000 and reap all the tax advantages this offers.

Capital Gains Tax

If you dispose of an asset and make a profit that exceeds the Annual Exempt Amount, which will be reduced from £6,000 to £3,000 from 6 April 2024, you may have to pay CGT.

Since you are each entitled to the Annual Exempt Amount, transferring assets between you and your partner could effectively double your Annual Exempt Amount to £12,000 – or £6,000 in 2024/25.

You could also reduce your CGT bill by transferring assets to the lower-earning partner as CGT is calculated based on the rate of Income Tax paid by the person disposing of the asset.

3. Set shared financial goals

Goal setting is an important part of effective financial planning. It can help you to identify the actions you need to take to achieve your objectives and keep you motivated long term.

You and your partner might have different ideas of what your future will look like. So, talking about your hopes and expectations could allow you to identify joint goals and work towards them as a team.

For example, understanding each other’s retirement dreams could enable you to put a joint plan in place to achieve them together. Even if you have different goals, by sharing them you’re likely to be in a better position to support one another so that you both get to where you want to be.

4. Create an estate plan together

Creating an estate plan together could ensure that you’re both protected if your partner becomes ill or dies. It also gives you control over your future, for example, by providing for your partner to make decisions about your health and finances if you’re no longer able to do so.

Estate planning may include:

• Writing your wills
• Inheritance Tax (IHT) planning
• Registering a Lasting Power of Attorney
• Making arrangements for later-life care.

Talking about what happens when one or both of you die may feel overwhelming, especially if your situation is not straightforward – you have a large, blended family, for example.

A financial planner can support you by providing guidance on matters such as IHT, which could allow you to pass on more of your wealth to loved ones.

And, if you’d like a professional to prepare your wills, Aspira’s Will Writing Service can offer the specialist advice you need, including helping you to create trusts and register Lasting Powers of Attorney.

Drawing up a will can be complex. Let us remove the stress and make sure everything runs as smoothly as possible for you.

Get in touch

To find out more about how we can support you to plan your finances as a couple, please email us at info@aspirafp.co.uk or call us on 0800 048 0150.

Please note

The information contained in this article is based on the opinion of Aspira and does not constitute financial advice or a recommendation for any investment or retirement strategy.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

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

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

[1] https://www.aviva.com/newsroom/news-releases/2023/02/almost-two-in-five-people-in-a-relationship-in-the-uk-admit-to-financial-infidelity/