5 reasons you should make a financial plan as a couple


A young couple have a difficult conversation about their finances

Money may not be the most romantic topic of discussion, but it is often a necessary talking point if you’re planning your future with a spouse or partner.

Financial planning should not be an individual endeavour, since working with your partner will give you both an equal opportunity to convey your plans and raise concerns.

In fact, a study by Royal London has found that money is the leading cause of arguments between partners in the UK, with 62% of couples admitting that they have had a finance-focused fight.

But why else is it important to make a financial plan with your partner? Read on for five reasons.

1. Helps to manage your expectations

Different people have different expectations when it comes to allocating the finances in a relationship. Some may want to split the bills in half regardless of income, while others may think it’s fair for the higher earner to cover a larger proportion.

Of course, you can only establish an equitable and agreed approach once you have discussed it with your partner.

Whatever your personal stance, you should broach finances with your partner early, even before you move in together if possible. This way, you know what to expect from one another when cohabiting. It also helps you create a budget, and a spending framework, that suits you both.

Working as a couple can also be beneficial when it comes to your long-term plans. Do you plan to buy a house? Help your children financially? And what do each of you want to do when you retire?

Discussing these issues means you’re pulling in the same direction when it comes to achieving your future goals.

2. Makes the most of tax benefits

There are several tax benefits available for couples that could help you to protect and grow your wealth more efficiently.

For example, an individual can contribute up to £20,000 into an ISA in the 2021/22 tax year. So, by working together with your partner, you could save up £40,000 into ISAs and pay no Income Tax or Capital Gains Tax (CGT) on your interest or investment returns.

If you’re aged 18 to 39, it also means you would each be able to open a Lifetime ISA if you were saving for a home or your retirement. You could then effectively double the government bonus you could receive.

There are also other tax benefits of working as a couple:

  • You could use the Marriage Allowance. If one of you earns less than the Personal Allowance (£12,570 in the 2021/22 tax year), you can transfer £1,260 of your Personal Allowance to your husband, wife, or civil partner if they are a basic-rate taxpayer. It’s a move that can save up to £252 in Income Tax.
  • Each individual has a personal CGT exempt amount. This is £12,300 in the 2021/22 tax year. It means that you can make gains on non-ISA assets of up to £12,300 in a tax year before CGT is due. By working as a couple, you could effectively double the amount of gains you make in a tax year before you pay CGT.

3. Encourages honesty in the relationship

Open financial conversations with your partner can not only help your finances but strengthen your relationship, too. Being honest about your financial situation can help build trust and will also prevent surprises when applying for services or loans that may require a credit check.

For example, being open and honest with your partner can help avoid awkward conversations about debts that are revealed when you come to take out a mortgage.

4. Helps align your long-term goals

Discussions about finance can also spark discussions about your shared future. Understanding what each of you aim to achieve in your later professional life and what you want from retirement can help you work together to get there.

By discussing your ambitions, both professionally and in retirement, you can work together to help make them happen.

You may find that you have different aims for later life. Perhaps you want to keep on working as you enjoy it, while your partner wants to retire and travel the world? Having these conversations can help you to make compromises and agree on a plan you’re both happy with.

5. You can draw your income tax-efficiently in retirement

Planning together also helps you draw your income in retirement tax-efficiently.

For example, both of you will get a Personal Allowance in each tax year. In 2021/22 tax year this is £12,570. This means that, between you, you can take a joint tax-free income of more than £25,000.

If you’re both drawing income from pensions or other sources, you can work together to limit the amount of Income Tax you pay by maximising your respective Personal Allowances and 20% tax bands.

For example, in 2021/22 you only start paying higher-rate Income Tax when you earn more than £50,270. So, if you wanted to generate an income of £60,000 a year, it could pay for each of you to draw £30,000 (so you both pay tax at 20%) rather than one party drawing £55,000 and the other £5,000 (as the higher earner will lose some income to 40% tax).

By working together, you can effectively put together an income strategy that will provide an annual income of £100,000 between you and only pay 20% in tax.

Get in touch

If you and your partner would like to explore how a joint financial plan could benefit you, please get in touch. Email info@investmentsense.co.uk or call 0115 933 8433.

Please note

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.

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.

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

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The tax implications of pension withdrawals will be based on your individual circumstances. Levels, bases of and reliefs from taxation may change.