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Managing your finances as a couple

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Discussing finances may feel uncomfortable, but it is crucial to maintain a healthy relationship

Transparency is the foundation of any strong relationship, which holds true regarding financial matters. It is easy to fall into the trap of assuming that you and your partner have similar financial habits and attitudes.

Stay on track and work together

Open conversations about finance can help set expectations, resolve issues, formulate a budgeting plan that suits both partners and construct a robust financial plan. Aim to establish mutual goals. Having individual life objectives is commendable, but it might be easier to stay on track if you feel you’re working together. Setting one or two shared goals provides a tangible target for you as a couple.

The significance of setting goals cannot be overstated. It helps determine how much money needs to be saved and where it should be invested. For instance, placing this fund in a low-risk cash savings account would be prudent if the goal is to upgrade to a larger property in three years. This strategy eliminates the risk of the savings plummeting in value right before they are needed.

However, if appropriate, consider investing funds in the stock market for long-term goals spanning ten or more years. This approach allows your money to grow over time, helping you achieve your goals faster.

Tax-efficient income and growth

Tax planning might not be the most appealing topic, but it offers several opportunities that could help your money stretch further. For example, Individual Savings Accounts (ISAs) allow each partner to invest up to £20,000 a year (2023/24), offering the advantage of tax-efficient income and growth. If both partners open an ISA, a combined £40,000 is shielded annually from Income and Capital Gains Tax (CGT).

If your ISA allowances are exhausted, the CGT exemption permits each partner to realise tax-free investment gains of up to £6,000 in the 2023/24 tax year. Married couples or those in a registered civil partnership can transfer investments between one another tax-free, effectively doubling the CGT exemption to £12,000. Remember that the CGT exemption will be reduced to £3,000 from 6 April 2024.

The personal savings allowance provides an amount of interest that can be earned without tax. This is £1,000 for basic rate taxpayers, £500 for higher rate taxpayers and nil for additional rate taxpayers. Married couples or those in a registered civil partnership could consider transferring savings between each other to maximise each partner’s personal savings allowance.

Avoiding substantial financial hardship

Discussing life’s darker aspects, such as death and illness, may not seem ideal for a romantic evening, but it’s crucial to ponder how your finances would fare if the worst were to happen. As partners, your financial lives are likely deeply entwined; a serious illness or demise of one could lead to substantial financial hardship for the other.

We’re here to help you navigate these difficult conversations and decisions. We can assist you in selecting the right protection policies and levels of cover tailored to your unique circumstances.

Wealth and assets allocated according to your wishes

This is also an opportune time to consider drafting a Will. Creating a Will ensures that your wealth and assets are allocated according to your wishes. This vital document guarantees that your money and other possessions go to the intended recipients, fulfilling your wishes.

Having a Will becomes even more crucial if you’re not married or in a registered civil partnership. Even after living together for years, without a Will you have no legal rights to your partner’s estate if they pass away.

THIS ARTICLE DOES NOT CONSTITUTE TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.

THE VALUE OF YOUR INVESTMENTS CAN GO DOWN AS WELL AS UP, AND YOU MAY GET BACK LESS THAN YOU INVESTED.

THE TAX TREATMENT IS DEPENDENT ON INDIVIDUAL CIRCUMSTANCES AND MAY BE SUBJECT TO CHANGE IN FUTURE.

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