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I SA-y yes! How soon-to-be wedded couples and newlyweds can use their ISAs
From venues and catering to the dress and rings, wedding expenses can quickly add up. With the average cost of a UK wedding now more than £20,000, and with so many other pressures on our finances, putting money aside for your special day can feel challenging.
A Cash ISA can be an efficient way for couples to save for their big day. With the Personal Savings Allowance limited to £1,000 for basic rate taxpayers, the tax-free allowance in an ISA has the potential to help you reach your goals sooner. Chris Henderson, Save and Pay Director at Tesco Bank, shares his top tips on how couples can save for a wedding and beyond.
For any couple, it’s important there’s an open and honest discussion about finances and how you can work together save for your wedding. Agreement is needed on the budget for your celebrations, how much you’re both willing to spend, and how close you are to reaching your target.
Putting a figure on the nuptials can help with budgeting and everyday spending (will you need to cut back on expensive date nights to save enough?), and working together now will help set good habits for future goals like saving for a new home or starting a family.
It always helps to start saving as early as you can. It gives you more time to reach your goals, and if you’re using a Cash ISA to save it also helps you make the most of your £20,000 allowance as you have more time to earn tax-free interest on your money.
Depending on your wedding timeline, you may be able to maximise the £20,000 allowance in both the 24/25 and 25/26 tax years, before it reduces to £12,000 from April 2027.
3. Consider locking your money away
There are two different types of Cash ISAs: Instant Access and Fixed Rate. An Instant Access Cash ISA lets you dip into your savings pot whenever you want without any charge, giving you flexibility in case you need some extra cash. These accounts generally have a standard variable rate, meaning the interest rate on your savings can go up or down.
A Fixed Rate Cash ISA, on the other hand, gives you a guaranteed interest rate for a fixed period (such as 12 months), meaning you can often benefit from a higher interest rate. This is a good option to boost your savings for a big event - not only will it grow at a faster rate, but not having easy access to it means you’ll be less tempted to dip into it for other purposes.
4. Boost your tax allowance
Once you’ve tied the knot, married couples can benefit from a boosted tax allowance. If one spouse has maximised their Cash ISA allowance of £20,000, it is possible to pay into the other’s ISA instead, effectively allowing a married couple to save up to £40,000 tax-free in a single tax year.
This can be great to reach any other big-ticket savings goals while still earning tax-free interest on your savings - perfect for that honeymoon trip away together!
5. Get creative!
Think about how you can work together to reach your savings goals faster. With double the allowance, you could opt for one Instant Access ISA and one Fixed Rate, utilising better interest rates without having to give up flexibility. Doing this can also help you save towards different goals, like choosing a Fixed Rate ISA to save for a kitchen renovation while dipping into your Instant Access ISA for year-round holidays.
You just need to make sure your total Cash ISA deposits in a year don’t exceed your yearly allowance of £20,000, or £40,000 if you choose to utilise your partner’s allowance too.
