3 useful tax benefits of planning your finances as a couple


When growing your wealth as effectively as possible to reach your financial goals, it’s important to do so efficiently. This is where planning your finances with your partner can help.

If you’re used to organising your money individually, this might take some adjusting to but there are a variety of benefits that it can bring you. In particular, it can help to reduce your tax bill so read on to discover three ways it can help you.

1. You may be able to pay less Income Tax

If you’re married to your partner, or you’re in a civil partnership, one of the main benefits of planning your finances together can be that, in any given tax year, you can transfer up to £1,260 of your Personal Allowance to your spouse or civil partner. This can help to reduce their Income Tax bill by up to £252.

You can benefit from this if the lower earner in your partnership has an income below the Personal Allowance, which is typically £12,570.

If you want to know how much you could save, you can use the government’s Marriage Allowance calculator to find out.

2. You could pay a lower amount of Capital Gains Tax

If you have significant investments, or more than one property, you and your partner could benefit from planning your finances together in order to reduce your Capital Gains Tax (CGT) bill.

If you have a significant amount of personal assets, you may be liable for a large tax bill when it comes to dispose of them. Typically, you pay CGT when you sell an asset that is worth more than £6,000, as well as when you sell property that is not your main residence.

Each year you have an annual CGT allowance, which for the 2021/22 tax year is £12,300. Once you have breached this threshold, you will be taxed at between 10% to 28%, depending on your earnings and the type of asset.

However, if you are nearing the allowance threshold, you could transfer some of your assets to your partner, meaning that they could use their own allowance. Essentially, by planning together you can double your allowance to £24,600 before you have to pay CGT.

Furthermore, if your partner earns less than you do, transferring assets to them to sell could mean that they pay a lower rate of tax when they dispose of them.

Please note that transferring assets from one partner to another can sometimes have tax complications, so you may benefit from seeking professional advice before you do so.

3. You may be able to reduce your Inheritance Tax liabilities when you pass away

While nobody likes to dwell on their own mortality, it can be important to consider the financial implications of death. If you’re married or in a civil partnership, one of the ways that planning your finances together benefits you is that it can reduce your Inheritance Tax (IHT) liabilities.

When you die, your loved ones have to pay IHT on the value of your estate over the value of £325,000. If you leave your main residence to your family, this limit is raised by an additional £175,000, bringing the total tax threshold up to £500,000.

If you are married or in a civil partnership, then there are several important benefits when it comes to IHT. When the first person in the relationship passes away, they can give the entire value of their estate to their partner without needing to pay IHT on it, no matter how much it is worth.

The second benefit is that when the remaining partner passes away, they can add their deceased partner’s nil-rate band to their own, doubling the amount. This means that you can leave up to £1 million of assets in your estate before it is liable to be taxed.

If you and your partner hold a large amount of assets, this could reduce your loved ones Inheritance Tax bill by a considerable amount.

Finally, you may be able to inherit their ISAs without the risk of any IHT liability issues when your partner passes away.

According to the Additional Permitted Subscription rules, if your spouse or civil partner were to die, you could increase your own ISA allowance by the amount that they held in ISA funds. This would allow you to effectively inherit it and the tax benefits it provides.

This applies for both Cash and Stocks and Shares ISAs, meaning that either you or your partner can hold onto the combined value of your ISAs even if the worst should happen.

Get in touch

If you and your spouse want to be able to manage your money in the most effective way, get in touch. Please email info@investmentsense.co.uk or call 0115 933 8433.

Please note:

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