Alleviate financial stress and ensure you start of married life financially secure
Weddings celebrate love, commitment and the union of two lives, shared with family and friends. However, making this day memorable often comes at a significant financial cost. According to data, the average wedding in the UK costs £20,700 [1].
Wedding spending increased in almost every category between 2022 and 2023. The most significant cost is that of the wedding venue (£9,877 average with catering and £6,084 without catering, representing 25-50% of the total wedding budget).
Careful planning and strategic financial decisions can alleviate financial stress, ensuring the start of your married life is financially secure.
Here, we explore some key considerations for pre-marriage financial planning and offer guidance to manage your future finances effectively as a couple. A little preparation goes a long way, from setting a sensible budget to managing financial contributions and tax allowances.
Setting a budget that works for you
The foundation of sound wedding planning is deciding on a budget. How much do you want to spend, how much do you realistically have to save and how will you fund the costs? Establishing a budget early on can prevent the unintentional overspending that often accompanies wedding planning. While it’s tempting to spend lavishly, a clear financial plan ensures the day is celebrated within your means.
Remember that wedding planners or event hosts may encourage you to go beyond your budget to create a ‘perfect’ day. The data shows that 59% of couples admitted to going over budget when planning. By setting a spending limit and breaking costs into manageable segments, you gain control – venue, catering, attire, entertainment, etc. – without surprises.
Securing your funds
Once you have outlined your budget, consider how you’ll finance the wedding. Are you planning to save? Borrow? Or a combination of both? If financing is required, consider repayment plans and whether they comfortably accommodate mortgage or household bills. Avoiding financial strain is critical; overspending can lead to stress, which may affect your relationship.
Savings allocated for your wedding should ideally be stored in an easy-access cash savings account. Keeping these funds there ensures they’re secure from market fluctuations and available precisely when needed. Some couples also use cash savings platforms that may offer competitive rates and tools to simplify money management.
Contributions from family
It’s common for family members to want to contribute towards the big day. Whether from the ‘Bank of Mum and Dad’ or contributions from grandparents, these can significantly reduce financial pressure. Additionally, family gifts can provide Inheritance Tax relief. The UK government allows tax-free wedding gifts of up to £5,000 (for a child), £2,500 (for a grandchild or great-grandchild) or £1,000 (for other relatives or friends). These tax-free thresholds are per individual, so a set of parents could collectively gift up to £10,000.
Did you know you can combine wedding gift allowances with an annual gift exemption? For instance, alongside a £5,000 wedding gift, parents can contribute £3,000 tax-free under the annual exemption, all within the same tax year. Not only does this help secure your dream wedding, but it also reduces the potential Inheritance Tax liability on their estate.
Considering a prenuptial agreement
While not the most romantic notion, discussing and creating a prenuptial agreement could provide peace of mind for both partners. A prenup is a legally binding document outlining each partner’s individual assets and financial responsibilities in case of divorce. Although no one likes to think about worst-case scenarios, being prepared means avoiding unexpected challenges later – this is the essence of thoughtful financial planning.
Bear in mind that divorce is more common than many realise. Couples need to discuss their financial situations openly before marriage. Addressing debts (e.g., credit cards or student loans), earnings, savings and financial habits will help provide a clearer picture of their combined financial status before embarking on their married life together.
Post-marriage financial benefits
Unlike cohabitation, marriage benefits couples in taxation and finances. One key advantage is the tax-free transfer of money or assets between spouses. These transfers may reduce overall tax liability for couples with varying income levels.
For instance, if your spouse is a higher rate taxpayer and you’re a basic rate taxpayer, they could transfer investments to you, allowing for lower tax charges on dividends. With significant changes to the UK dividend allowance – dropping to £500 in the 2024/25 tax year – it is more important than ever to consider financial planning.
Looking beyond the wedding
While your wedding day is a momentous occasion, it’s just the beginning of your financial future together. Many couples overlook the importance of aligning their wedding spending with long-term financial goals. Without careful financial planning, the consequences can linger well after the event. Seeking advice from a professional financial planner can help you create a tailored financial strategy for the wedding and your life as a couple.
Source data:
[1] Data from Hitched The National Wedding Survey of over 1,800 couples who married in 2023 – 07.02.24
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.
