Do you trust your partner enough to give them money for tax purposes?
One option is for couples to plan together, and share savings and investments in order to keep their tax bill down. However, this requires some serious trust.
If they share everything between them, it means both parties can take advantage of their ISA and pension allowances. If they hold anything on top of this, by splitting it, they might be able to stay within their annual tax-free allowances. If anyone other than married couples or civil partners do this, there could be tax to pay on the transfer — but if they're married, there's no immediate tax bill.
Read more: How to start investing with an employee share scheme
The good news is that according to research from Hargreaves Lansdown with Opinium, almost three quarters of people trust their spouse enough to share their savings and investments like this, in order to take advantage of tax rules.
The more assets someone has, the more likely they are to trust their spouse with some of them — with 79% of savers and 84% of investors saying they would be happy to share assets to save tax.
Higher earners are also more prepared to hand over their cash — including 82% of higher rate taxpayers. This will be influenced by the fact they have more to gain from the move.
If you don't think you can trust your partner, it pays to listen to your gut, because sharing assets comes with risks. If you've handed money over, you'll have given it away entirely, so you will no longer have any control over it. Your partner will be free to make any decisions they want with it, moving investments or savings, or spending as much as they fancy. You have to ask yourself whether you're prepared to relinquish that control.
Read more: How to save money on your council tax bill
You also need to appreciate your position if you get divorced. You may be able to come to an agreement about division of assets, or the courts will divide your estate up in a way it believes is fair. However, that doesn't mean you'll get this money back on the grounds it was yours in the first place. Any court will prioritise need and start with equality, so might not see a significant chunk of these assets again. There's also the possibility that an estranged spouse will spend as much of the money as possible, in order to reduce your settlement.
It means that while sharing your assets can be a great way to cut your tax bill and save money, it's important to think long and hard about it first. Losing a chunk of money to the taxman is bad enough, but losing all of it to a partner who turns out to be untrustworthy would be even worse.
Read more:
How much money do you need to retire?
How to avoid finance scams on social media
Why you can trust an 18-year old with their junior ISA – and how to create one
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