Love is in the air: How joint accounts work (and the risks of opening one)

Karl 8th Feb 2024 No Comments

Reading Time: 5 minutes

Given Valentine’s Day has been and gone, we thought that now is the perfect time to take a closer look at the ins and outs of joint accounts.

In this article we’re going to explore joint savings, joint investment, and joint bank accounts. Plus, we’ll touch on all of the things you need to be aware of before tying the knot financially with someone else.

Keep on reading for all of the info, or click on a link below to head straight to a specific section…

What is a joint account?
Who can open a joint account?
What are the benefits?
What are the drawbacks?
Joint accounts: What about tax?

What is a joint account?

Most ‘normal’ savings accounts, current accounts, and investment accounts are designed for individuals. When it comes to these accounts, anything saved in one belongs to the account holder – full stop.

A joint account, however, is exactly what it says on the tin. It refers to an account whereby two people jointly manage it. If you’re named on a joint account then you can freely deposit and withdraw funds at will. You’ll also be able to view any previous transactions associated with the account – including any transactions made by the other account holder.

Joint accounts are most commonly held between trusted partners, such as a spouse living at the same address. However, this doesn’t have to be the case. Many providers allow joint accounts to be held between non-married partners, relatives, friends, or even flatmates.

You can’t have a joint credit card or ISA

It’s worth knowing that there’s no such thing as a joint ‘credit’ card as such. If you want to add your partner to your credit card account then the only way to do this is to nominate them as an additional cardholder.

While additional cardholders have permission to spend on a specific card, ultimate responsibility for repayments remain with the main cardholder. This is why, technically, there isn’t such a thing as having a joint credit card.

On a similar note, ISAs – whether a Cash ISA, or a Stocks & Shares ISA – cannot be held jointly. If you want to have a shared savings or investment account, it must sit outside of a tax-free wrapper.

Who can open a joint account?

If you’re interested in opening a joint savings, bank, investment account, you’ll need to find a provider which supports shared accounts – not all do.

Marcus, Santander, Halifax, and Coventry Building Society are examples of savings providers that permit joint savings accounts, though this list is by no means exhaustive.

Meanwhile, Interactive Investor, Hargreaves Lansdown, AJ Bell, and Saxo Markets are some big-name investing firms which allow joint accounts.

Once you’ve nailed down your chosen provider – whether that’s a saving, investment, or even bank account – you’ll then need to complete all of the ‘normal’ steps associated with opening any new financial product. For example, you’ll need to provide your permanent UK address, national insurance number, date of birth, etc.

If you already have an individual savings or investment account then some providers may allow you to simply add another person to your existing account. However, you can of course choose to keep any individual and joint accounts separate.

What are the benefits of opening a joint account?

Opening a joint account with another person has a number of potential advantages. From making it easier to work towards shared financial goals, to keeping a closer eye on your household expenses, here’s an overview of the plus points…

1. Added motivation to hit financial goals

Sharing an account with a trusted partner may give you with some much-needed motivation to hit any shared financial goals. This may be particularly useful if you’re saving (or investing) for an important life event or milestone – such as a wedding, house deposit, or for your children’s future.

2. Gives shared responsibility for regular payments

Joint savings accounts can be a useful way of sharing financial responsibility for monthly mortgage payments, or other household bills. This may be a big boon for couples where one partner might be considered to be ‘better with money’ than the other!

3. Can help focus household finances

When it comes to joint accounts a shared current account can make it easier to keep an eye on each other’s spending. This can be a positive if you’re both keen to instil financial discipline within your household, though always ensure this is something both partners are happy with.

What are the drawbacks of opening a joint account?

Now we’ve highlighted reasons why people may wish to open a joint accounts, let’s take a look at some possible drawbacks…

1. Both partners are equally responsible

It’s really important that you open a joint account with a trusted person. While this doesn’t have to be your married partner, it’s vital that you don’t just add someone else to your account willy-nilly.

Remember, with joint accounts BOTH account holders are essentially responsible for any withdrawals. This could be problematic for partners with differing attitudes towards money and spending.

2. Shared accounts may harm a partner’s credit score

Another potential drawback of opening a joint bank account is the risk of financially linking to someone with a poorer credit score than yourself.

Put simply, if you open a joint bank account with someone with a questionable credit score this could impact your own creditworthiness. This, in turn, could harm your chances of being accepted for competitive credit products in the future.

Do note that this isn’t the case with joint investment or savings accounts as a financial ‘link’ isn’t created between partners for these products.

3. Things could get messy if you split up

Sadly relationships can and do fail. This is why opening a joint account with a partner ultimately carries a risk in this regard.

As a rule of thumb, if you had a joint account when married, any balances will be split between you and your partner in the event of you breaking up. If you aren’t married, then any joint account balances will typically be split by how much each party has contributed to the overall pot.

Be mindful that the above is a general rule, and things can get more complex depending on where you live in the UK. For more on the ins and outs of dealing with your finances after splitting up, the Government’s Money Helper website is a good place to start.

Joint accounts: What about tax?

Under the normal Personal Savings Allowance (PSA), basic-rate taxpayers can earn £1,000 per year in interest on their savings without having to pay tax on it. (This applies to interest earned from non-ISA accounts).

Higher-rate taxpayers, meanwhile, can earn £500 per year tax-free, while additional-rate payers don’t get an allowance.

For joint savings accounts the PSA still applies. This means that if you’re a married couple holding a joint savings account any interest you earn from the account will be split between you 50:50 for the purposes of calculating your PSA. For unmarried couples, their individual PSA is determined by how much each party has contributed.

With regards to joint investment accounts, any returns are automatically calculated 50:50 for the purposes of liability for Capital Gains Tax, though you can inform HMRC of an ‘alternative beneficial interest’ if either party wishes to claim a higher proportion of an investment.

To learn more about tax liabilities on joint accounts speak with a tax professional.

Is your partner a US citizen?

If your partner is American you may not be able to open a joint account due to the complex nature of US tax law. Put simply, Uncle Sam takes a keen interest in the global assets of its overseas citizens and many UK-based providers won’t touch US citizens with a bargepole for this very reason.

If you’re interested in opening a joint account with an American citizen, do check to see whether your chosen provider supports it.

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