Recent research from Royal London has found that money is the number one cause of arguments between UK couples. Three in five (62%) have argued about money, with the most common cause of issues being that one partner is “spending too much”.

While a third (33%) of couples surveyed admitted to being incompatible with their partner when it comes to financial matters, there are benefits to planning your saving and spending as a couple.

It’s also crucial to talk openly about money matters. Despite this, 33% of those surveyed admitted to keeping financial secrets from their partner, including hidden savings pots and secret debt.

Keep reading to find out why you might both be better off planning your finances as a couple.

Communication is key

Peter Saddington, of the counselling service Relate, recently confirmed to the Guardian that money worries are the most common reason for relationship difficulties. He suggests that “Tackling the topic early on avoids the potential for resentments,” which, he says, “can lead to more destructive arguments.”

Talking about money might be uncomfortable but doing so – and with a commitment to honesty and openness – is vital.

While you and your partner might be used to having “date nights”, have you considered setting aside time for a “money date”? It might not be as romantic, but having regular discussions about money could highlight potential issues and help you to work through them together.

3 benefits of planning your finances as a couple

1. Potential savings on Income Tax

If you are married, or civil-partnered, you might be able to make use of the Marriage Allowance. This applies when one of you has income below the Personal Allowance (£12,500 for the 2021/22 tax year) and the other pays Income Tax at the basic rate.

By transferring up to £1,260 of your Personal Allowance to your spouse or civil partner, you could reduce their tax bill by £252.

As its name suggests, the Marriage Allowance is only available to married, or civil-partnered couples, and won’t apply if you are unmarried but cohabiting.

2. You might be able to reduce your tax liability on gains

When you sell, or “dispose of”, assets, you might be liable for Capital Gains Tax (CGT) on the gains you make. Assets might include a house that is not your main residence or the profit on shares you hold outside of an ISA.

Each year you receive a CGT Allowance (for the 2021/22 tax year it stands at £12,300). You only start to pay tax once your gains exceed this amount. The rate of tax you pay depends on your tax bracket, the size of the gain, and the type of asset being disposed of.

As a higher- or additional-rate taxpayer you’ll pay:

  • 28% on your gains from residential property
  • 20% on your gains from other chargeable assets.

The calculations involved for basic-rate taxpayers can be more complicated. You’ll generally pay 10% (or 18% on residential property) and the higher rates, as above, on any amount above the basic rate.

However, if you are approaching your CGT Allowance for the year, you might consider transferring some of your assets to your partner, thereby making use of their allowance. This effectively doubles the size of the gain you can make before CGT becomes payable.

If your partner is in a lower tax bracket than you, the transfer could mean that the rate of CGT payable decreases too.

Transferring assets can have other tax implications, so speak to us before you decide if it makes financial sense for you.

3. Passing your wealth to your partner on death

Inheritance Tax (IHT) is payable at 40% on the value of your estate that exceeds certain thresholds. Estate planning is crucial in preventing your loved ones from being left with a huge IHT liability, and we can help you put plans in place to pass on your wealth tax-efficiently.

The nil-rate band – the threshold over which IHT becomes payable – is currently £325,000 and is due to remain at this amount until at least 2026. You also have a residence nil-rate band that applies when you pass your main residence to your family. This stands at £175,000 (also frozen until 2026), bringing your total IHT threshold to £500,000.

On death, you can pass your whole estate to your spouse or civil partner with no tax to pay, regardless of whether it exceeds the IHT threshold at that time.

Not only that, but when your surviving partner dies, they can add their unused threshold to yours, effectively doubling the tax-free assets they can hold. The estate, including a main residence that is passed to the next generation, can be worth up to £1 million with no tax to pay.

Get in touch

Money worries can cause stress and anxiety, as well as problems in your relationship. Taking the time to discuss your financial situation can make a real difference, as can making money plans as a couple.

Boolers can help you and your partner put together a joint financial plan that works for both of you. If you would like to discuss a joint approach to your finances, or you have questions on any other aspect of your long-term plans, please contact us today.