The honeymoon’s over and nothing says ‘back to reality’ more than sorting out your finances.
Sure you can put it off and worry about it later. But if you delay the necessary, you could be denying yourselves some valuable tax savings and setting yourself up for potential headaches later.
Here’s my take on the finance to-dos should be at the top of the list for newly-married couples.
1) Update your tax status
Changing your tax status means you can claim Marriage Allowance. That could cut £250 from your tax bill for 2019-2020.
To benefit, one of you needs to earn less than the Personal Allowance (currently £12,500). The other partner has to pay basic-rate tax (20%).
If you meet the qualifications, then the lower earner is allowed to transfer 10% of their allowance (£1,250) to their partner, thereby boosting their tax-free amount. For example:
- You earn £11,000, your spouse earns £35,000
- Because you earn less than £12,500, you pay no income tax
- Your partner pays 20% tax on £22,500 (£35,000 less £12,500)
- You can give your spouse £1,250 of your tax-free allowance
- Their tax-free allowance increases to £13,750
- Your spouse only pays tax on £21,250 (£35,000 less £13,750)
- As a couple you save £250
Marriage also means you get to double your allowance for Capital Gains Tax (CGT) if you sell anything you own together. And if you sell (or gift) any assets to your husband or wife, you avoid paying CGT altogether.
2) Sort out your will
To be sure, this isn’t the most romantic thing to do after promising to spend the rest of your lives together. But if you have a will before you marry and then say ‘I do’, it automatically becomes void.
While your husband or wife will typically inherit your assets after your death, it’s still a good idea to sort out the finer details… just in case. Amending your will to reflect your new-found marital status protects your wishes and makes sure your money goes where you want it to.
3) Unite your bank accounts in matrimon(e)y
It’s up to you whether to set up a joint account or keep them all separate. But streamlining your finances can help you keep track of hard-earned cash. It also means you’re less likely to have mix-ups about who’s paid what bill.
Keeping your own account might make you feel financially free, but if you die, your spouse could be frozen out of the account. A joint set-up enables your partner to still access funds in the event of your untimely death.
Of course, there’s nothing to stop you choosing the best of both worlds and having your own account and a joint account. Whatever you do, agree about what works for the both of you, as money is sadly one of the top reasons for divorce in the UK.
4) Work out your debts and expenses
Being married doesn’t automatically mean your spouse’s debt is yours if they’ve racked it up in their own name. It most cases, it shouldn’t affect you if you decide to apply for credit on your own.
That changes if you apply for a loan together and your other half has a poor credit history. A ‘financial associate’ with a low score means you might not get the most attractive interest rates or the mortgage deals.
Setting up a plan to pay back debt might be unromantic but it could help speed up repayments and shore up less than perfect financial reputations. If one of you has credit card debt, think about switching credit cards for the best offers. Finding a great deal on a 0% balance transfer card, for example, could provide some needed breathing room to pay down the debt without racking up more interest.
If you’ve never lived together full time, now’s also the chance to consolidate your expenses. Bank statements and a fine-tooth comb will highlight duplication and unnecessary costs — nobody needs two Netflix accounts!
5) Have a money goal
Don’t get stuck in a money rut! Whether you’re aiming for a house deposit, a holiday of a lifetime or a new car, setting a joint goal will motivate you to spend wisely.
For tips on ways to bulk up your bank balance, take a look at these ways to increase savings. And if you’re struggling to find savings in the first place, my colleague Peter Stephens has written about how to budget.
Facing your finances after an expense like your wedding or honeymoon is never going to be easy. But working through the admin can save you hassle and money in the long run.
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