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33% of couples say they’re financially incompatible. Here are 7 tips for creating financial harmony

How often do you talk about money with your partner? The way money is handled in a relationship can sometimes make or break a couple, and research suggests it’s something many people struggle with.

According to a survey from Royal London, 62% of couples in the UK say they have argued with their partner about money. The most common reason is that one partner is deemed to be “spending too much”.

While disagreements are part of every relationship, a worrying third of couples say they’re incompatible with their partner when it comes to spending and saving. And a quarter considers their partner to be irresponsible with money.

How you handle finances now affects your long-term plans, so finding a way to create financial harmony as a couple is important. It can not only reduce arguments but mean you’re both working towards the same goals.

If money decisions can cause some friction in your relationship, here are seven tips that could help.

1. Make money topics a part of your normal conversation

Despite money playing a huge role in your life, the research found that couples often find it difficult to talk about finances.

Making money topics part of the conversation in your home is an important first step. Sometimes, disagreements may occur due to a misunderstanding that being more open can solve. In other cases, a conversation can help you understand your partner’s view so you can minimise financial challenges.

2. Be open about your financial situation

If you currently keep your finances largely separate from your partner, they may not be aware of your situation, and vice-versa.

Being open about debt, outgoings, and other areas of finance can mean you’re both in a better position to understand the financial decisions being made. It can also give you an insight into how your partner views money and where your differences may lie.

Understanding your partner’s financial situation is particularly important if you’ll be making a financial commitment with them, such as opening a joint account or taking out a mortgage.

3. Create a joint household budget

If you share household expenses, understanding how they will be split and what they will cover is important.

For some couples, simply splitting expenses 50-50 makes sense. For others, taking income differences into account may be better suited.

What’s important is that you find an option that works for you and create a plan that matches your needs. This may mean depositing a set amount into a joint account every month or each of you taking responsibility for different outgoings.

4. Give yourself and your partner a discretionary budget

How your partner spends money can be a cause of conflict, especially if you don’t agree with their purchases. If this is something you argue about within your relationship, giving yourself and your partner a set budget to use however you like can avoid this.

It means you can both indulge in what’s important to you while knowing that you’ll still be on track to cover essentials and other financial goals you may have.

5. Set out clear saving and investing goals

With a day-to-day budget organised, it’s time to start thinking about other goals you may want to set aside money for. This could be to buy a house, start a family, go on holiday, or build a financial safety net.

Having clear saving or investing goals means you’re both working towards the same things.

Knowing that you both need to put money away at the beginning of the month means you know where you stand, and it can minimise arguments.

6. Don’t overlook long-term goals

Saving goals looking ahead for the next few years are important, as are ones that will affect your life in several decades.

The sooner you start thinking about areas like retirement planning, even if it seems a long time away, the more manageable your goals will be.

If you haven’t discussed how much you and your partner are putting away in your pension each month, for example, it can be difficult to calculate if you’re on track for a financially secure future as a couple.

So, when setting out a budget and what you want your future to look like, don’t put off long-term planning.

7. Work with a financial planner

Balancing different goals and views on money can be a challenge. By working with a financial planner, you can create a plan that you can both have confidence in and incorporates both of your aspirations to provide long-term security.

The financial planning process can help make sure you’re both on the same page, from discussing what your long-term goals are to reviewing your risk profile when investing. These steps can mean your financial decisions reflect what you both want from life with a clear blueprint to follow.

If you’d like to arrange a meeting with us, please contact us.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Why it pays to use your 2022/23 ISA allowance right now

The 2022/23 tax year has only just started, but you should already start thinking about how you’ll use your allowances over the next 12 months. It can help maximise your assets.

In the 2022/23 tax year you can deposit up to £20,000 into ISAs. If you don’t use this allowance before the end of the tax year, you lose it. You can save or invest tax-efficiently through an ISA, so making full use of your allowance can help your money go further.

The period from February to the beginning of April is sometimes dubbed “ISA season” as savers and investors scramble to find the best rates to make use of their allowance before the end of a tax year.

If you left using your 2021/22 ISA allowance until the deadline was near, don’t let your ISA slip your mind now. It’s worth thinking about maximising it earlier in the 2022/23 tax year. Here’s why.

Drip-feeding your deposits can make your ISA goal part of your budget

If you want to maximise your ISA allowance or have a goal for how much you want to put in, making regular deposits a part of your budget can help.

Depositing £1,666 into your ISA each month can be more manageable than adding a lump sum at the end of the tax year. If you don’t have a lump sum to add to your ISA, breaking down your end goal can make sense.

It can help ensure that the money doesn’t get used to cover other expenses and keep you on track.

If you’re thinking about breaking down your ISA deposits over the year, setting up a standing order can simplify it.

In addition to making deposits more manageable, drip-feeding your money can be useful if you’ll be investing through an ISA.

Investment markets will rise and fall throughout the year. So, by spreading out deposits, you’ll be buying at different points throughout the market cycle. It’s an approach that can remove the temptation to try and time the markets.

Depositing a lump sum now means you have longer to earn interest or returns

If you already have a lump sum available to deposit, doing so now means you could have an extra 12 months of interest or returns than you would if you waited until April 2023.

If you’ll be saving through a Cash ISA, the extra interest added to your account over the year can really add up. Using your ISA allowance now can help you make the most of your money.

Adding a lump sum if you’ll be using a Stocks and Shares ISA to invest means you can potentially benefit from an additional 12 months of investment returns.

The graph below shows how investing £5,000 each tax year delivers different returns if you invested on the first working day of the tax year compared to the last working day.

Source: Hargreaves Lansdown

While both options have done well and returned over 99% growth, you would be better off by investing at the start of the tax year overall.

However, you should keep in mind that investment performance cannot be guaranteed.

Some years, investing at the start of the tax year could mean you end up with less if investments perform poorly. You should consider your investment time frame and risk profile when making investment decisions and reviewing performance.

Should you save or invest through your ISA?

If you want to use your ISA allowance for the 2022/23 tax year now, you should think about whether a Cash ISA or a Stocks and Shares ISA is right for you.

A Cash ISA is a useful way to save. Your savings will benefit from interest, however, as the interest rate is likely to be lower than inflation, your savings may be losing value in real terms.

Over the long term, the effects of inflation add up. As a result, a Cash ISA may be right for you if you’re building an emergency fund or are saving for short-term goals.

If you’re putting money away with long-term goals in mind, a Stocks and Shares ISA may be appropriate.

Investing provides a chance for your wealth to grow at a pace that matches or exceeds inflation. But this cannot be guaranteed, and market volatility can mean investment values fall.

Investing for a longer period can smooth out the ups and downs. As a result, you should invest with a minimum time frame of five years.

As well as time frame, you should also assess which investments are right for you. All investments carry some risk and the decisions you make should reflect your wider financial circumstances.

Are you ready to think about how to maximise your ISA allowance for the 2022/23 tax year?

Please contact us to discuss your options and the steps you can take to help your money go further, including using your ISA and other allowances this tax year.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

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.

Will disputes are on the rise. 3 things you can do to minimise the chances of your wishes being challenged

A will is the only way for your wishes to be legally enforceable when you pass away. However, it’s becoming more common for families to dispute wills. So, what can you do to ensure your will is upheld?

In most cases, a will is followed, and families will respect the wishes of the deceased. But the possibility of someone contesting your will is something you should think about.

According to a report in iNews, the number of Inheritance Act claims increased by 72% in 2021. The Inheritance Act allows a court to make orders for the provision of a spouse, child, or other dependents from a deceased person’s estate.

In addition, the number of will disputes fought in the High Court in 2020 was 192. This figure compares to 128 in 2018.

While disputes represent only a small proportion of estates, they can be costly and stressful for your loved ones. If you’re worried that someone could dispute your wishes, taking steps now to minimise the chances can provide you with peace of mind and help ensure your estate is distributed how you’d like.

Here are three things you can do.

1. Talk to loved ones about your wishes

Some disputes occur due to misunderstandings when people are grieving. In these cases, a conversation with your loved ones now can make a difference.

It can be difficult to talk about passing away and what you’d like to happen to your assets when you do, but it’s an important conversation.

It allows you to explain your decisions and provide loved ones with an opportunity to ask questions.  It means that when you pass away, they won’t be surprised by the contents of your will.

You may also want to write a letter of wishes. This document isn’t legally binding, but it can be used alongside your will to provide guidance and explain what you want in your own words.

2. Take care to avoid mistakes in your will

Someone can’t dispute your will simply because they don’t like the contents, they must have valid grounds for doing so.

One common reason is that the will is not valid, and this is often due to avoidable errors. For instance, if your will is not properly signed and witnessed, someone could challenge it.

While you can write your will yourself, seeking the support of a legal professional can minimise mistakes and provide you with peace of mind.

You may want to change your will in the future. You can do this either through a codicil, which makes an official alteration to your existing will, or by writing a new will. You should make sure alterations are clear and destroy any previous wills to avoid confusion and potential reasons for disputes.

3. Make it clear you understand your decisions and have the mental capacity to make them

Other reasons for contesting a will include that you didn’t understand the decisions you were making, that they were made under duress, or that you lacked the mental capacity to make them.

Maintaining clear records about your plans and speaking to people about them can be enough to show that you understand the contents of your will. As well as family, this may include professionals, such as a solicitor. Emails to your solicitor may demonstrate your wishes and that you fully understood the implications if a dispute arises.

If you’re worried that mental capacity may be used as a reason for contesting your will, obtaining the opinion of a qualified doctor, usually your GP, can help.

A trust could provide you with an alternative way to pass on wealth

A trust isn’t the right option for everyone, but it can provide you with an alternative way to pass on wealth if you’re worried about your will being disputed.

One of the reasons you may use a trust is that you can set out rules that must be followed by the trustee, who will manage it. This may include who will benefit from the assets held in a trust and when certain assets will be distributed.

A trust can also be an effective way to pass on wealth during your lifetime.

Trusts can be complex, and they may not be the right option for you, so it’s important to seek advice.

If you’d like help creating an estate plan, from understanding your assets to how you can pass on wealth while minimising disputes, please contact us.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Will writing and estate planning are not regulated by the Financial Conduct Authority.

Why good retirement planning is about more than your pension and money

If you’re nearing retirement, you may be starting to think about planning the next stage of your life.

What steps spring to mind? You may prioritise organising your pension, claiming your State Pension, or reviewing how much you have in a savings account. These steps are important for creating security, yet good retirement planning goes further than your finances.

So, what should retirement planning include? Setting out lifestyle goals is crucial for building a retirement plan that means you get the most out of your life.

Here are five questions that you should think about as you approach retirement. They can also help you get the most out of the financial planning process by ensuring your aspirations are at the heart of any decisions you make.

1. What are you looking forward to in retirement?

If you’re nearing retirement, you may be excited about the next stage of your life. Setting out what it is you’re looking forward to can help you make decisions that are right for you.

According to the Great British Retirement Survey from interactive investor, 49% of people that haven’t yet retired are looking forward to greater freedom and 42% see retirement as an opportunity for a new business or hobbies.

3 in 10 people still working think their life will improve when they retire. Pinpointing what it is that will make retirement an exciting milestone for you is crucial.

2. How will you fill your days when you retire?

While you may have big plans for your retirement, it can be easy to overlook the day-to-day when you set out your lifestyle.

Going from working full-time to having freedom can be overwhelming at first. Some retirees can find they don’t know how to fill their days initially and you may need a period of adjustment. By setting out how you’d like to spend your time before you retire, you can start building a retirement lifestyle that you find fulfilling.

3. What will give you purpose in retirement?

Much like filling your days, retiring can pose a challenge for some retirees if they feel like they’ve lost their purpose and drive when giving up work.

According to an Aegon report, just 4 in 10 people think about what gives their life joy and purpose.

Considering your driving force is a useful exercise at any point in your life and reviewing this as you retire is an important task.

4. How will you maintain social connections in retirement?

Work can play a pivotal role in your social life. So, when you retire, it can leave a gap.

Thinking about how you’ll maintain or create new social connections can improve your retirement lifestyle. That may mean making sure you stay in touch with family and friends or planning ways to get out of the house to meet new people, like joining a club that interests you.

Research from the National Institute for Health Research found that 1 in 3 people aged 50 years and over in the UK report feeling lonely. A lack of social connections can harm your mental health and has been linked to depression, so your social life in retirement is vital for your overall wellbeing and happiness.

5. Do you have any concerns about retirement?

While you may be looking forward to retirement, it’s natural to have some concerns too.

From worries about your finances to being anxious about the lifestyle change, thinking about your concerns is as important as setting out what you’re looking forward to.

It means you can address any worries that you have and put a plan in place to deal with them. By being proactive, you can really focus on enjoying your retirement to the fullest.

Using your lifestyle goals to shape your financial decisions

Lifestyle aspirations play a crucial role in effective retirement planning, but getting to grips with the finances remains important.

Having a clear idea about what you want to get out of retirement can help shape your financial decisions so they reflect your priorities.

If you want to see more of the world when you initially retire, taking a larger income from your pension during the first few years could make sense. Or if you hope to make workshops, classes, and hobbies a regular part of your schedule, including these costs in your budget can ensure you’re able to fill your days how you want.

By combining lifestyle and finances when you’re retirement planning, you can have confidence in the decisions you make. Please contact us to discuss your retirement and the lifestyle you’re looking forward to.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Everything you need to know about the 2022 spring statement

Against the backdrop of the continuing war in Ukraine, the chancellor has delivered his spring statement.

The war has contributed to uncertainty in the global economy, with the Office for Budget Responsibility (OBR) saying that, “given the unfolding situation in Ukraine, there is unusually high uncertainty around the outlook”.

Disruptions in global supply chains and the Ukraine war have led the OBR to revise downwards their forecast for growth over the next five years. The OBR now forecasts GDP to rise by 3.8% in 2022, down from its 6% growth forecast in last October’s economic and fiscal outlook.

The OBR then forecasts growth of 1.8% in 2023, 2.1% in 2024, 1.8% in 2025, and 1.7% in 2026.

Another current factor underpinning Rishi Sunak’s speech is rising inflation. According to the Office for National Statistics (ONS), inflation in February reached a 30-year high of 6.2%.

As the economic consequences of the Ukraine war continue to unfold, the OBR expects inflation to average 7.4% this year, with a further rise in energy costs in the autumn set to contribute further to the so-called “cost of living crisis”.

The chancellor tackled this issue first.

Fuel duty to be cut by 5p a litre until March 2023

As well as the £9 billion plan to help households pay around half of the April energy cap increase, unveiled by the chancellor in February, fuel duty will be cut for only the second time in 20 years.

Sunak cut the duty by 5p a litre until March 2023, calling it the “biggest cut to all fuel duty rates ever”. The reduction in duty will come into effect from 6 pm on 23 March 2022.

According to the Treasury, this cut represents a saving worth around £100 for the average car driver, £200 for the average van driver, and £1,500 for the average haulier, when compared with uprating fuel duty in 2022/23.

Cut in VAT on home energy installation

To further encourage households to invest in energy-efficient measures, and to keep energy costs down, Sunak announced an extension to the VAT relief available for the installation of energy-saving materials.

Taking advantage of Brexit freedoms, the chancellor announced that homeowners looking to install measures such as heat pumps or solar panels won’t pay any VAT (except for households in Northern Ireland).

The Treasury say that a typical family having rooftop solar panels installed will save more than £1,000 in total on installation, and then £300 a year on their energy bills.

A three-step tax plan for the rest of the parliament

Arguing that it’s “only Conservatives [who] can be trusted with taxpayers’ money”, Sunak unveiled a new three-point tax plan for the remainder of this parliament.

Calling it “a principled approach to cutting taxes”, the chancellor outlined the “direction of travel” of how he intends to reduce the tax burden responsibly and sustainably.

1. Help families with the cost of living

As the NHS rebounds from the Covid-19 pandemic, and with the challenges facing the social care sector, Sunak argued that it was only right that the rise in National Insurance contributions (NICs) – which will become the new Health and Social Care Levy in 2023 – stays.

However, to reduce the tax burden on working people, the chancellor raised the National Insurance Primary Threshold and Lower Profits Limit, for employees and the self-employed respectively, from £9,880 to £12,570. This equalises the NICs and Income Tax threshold from July 2022.

This means that individuals will be able to earn up to £12,570 a year without paying any Income Tax or NICs.

This increase will benefit almost 30 million people, with a typical employee saving more than £330 in the year from July. Around 70% of NICs payers will pay less contributions, even after accounting for the introduction of the Health and Social Care Levy.

The Treasury say that around 2.2 million people will be taken out of paying Class 1 and Class 4 NICs and the Health and Social Care Levy entirely.

Sunak also announced that, from April, self-employed individuals with profits between the Small Profits Threshold and Lower Profits Limit will not pay Class 2 NICs. So, lower-earning self-employed people will be able to keep more of what they earn while continuing to build up NI credits.

2. Create conditions by encouraging higher growth

As the chancellor set out at the Mais Lecture in February, the government considers that a new culture of enterprise is essential to drive growth through higher productivity.

So, Sunak announced a range of measures aimed at businesses including:

• The temporary £1 million level of the Annual Investment Allowance will be extended until 31 March 2023.
• The business rates multiplier will be frozen in 2022/23.
• A new temporary 50% relief in Business Rates for eligible retail, hospitality, and leisure businesses. It means the average pub, with a rateable value of £21,000, will save £5,200. The average convenience store, with a rateable value of £28,500, will save £7,000.
• Business rates exemptions for eligible plant and machinery used in onsite renewable energy generation and storage will be brought forward to April 2022.
• From April 2023, all cloud-computing costs associated with R&D, including storage, will qualify for R&D relief.
• The Employment Allowance will increase to £5,000. This means eligible employers will be able to reduce their employer NICs bills by up to £5,000 a year, and that businesses will be able to employ four full-time employees on the National Living Wage without paying employer NICs.

Sunak also announced he would be consulting on a range of measures to reform business taxes and reliefs ahead of the autumn Budget.

3. Proceeds of growth shared fairly

While arguing that it would be “irresponsible” to cut taxes in the current environment, Sunak reaffirmed his commitment to reducing the tax burden in the coming years.

He said that, by 2024, the OBR expects inflation to be back under control, debt to be falling sustainably, and for the economy to be growing.

So, presuming the government will have met its own fiscal principles, the chancellor committed to reducing the basic rate of Income Tax from 20% to 19% from April 2024.

This is a tax cut of more than £5 billion a year and represents the first cut in the basic rate of Income Tax in 16 years.

Interestingly, with more than 1,000 tax reliefs and allowances available, the government have also committed to considering tax reform “to better support a fair, efficient, simple, and sustainable tax system”.

Watch this space!

Get in touch

If you have any questions about how the spring statement will affect you and your finances, please get in touch.

All information is from HM Treasury Spring Statement 2022 document.

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.

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