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Paying rental income tax on jointly owned property

By
Elliott Jones

Joint property ownership tax implications

If you are a joint owner of a property with someone who isn’t your spouse or civil partner, the rental income you receive will be taxed based on the agreed split of ownership of the property or properties which you own.

You could be a joint owner with a parent or your child, or sister or brother, or with a friend or a business partner.  

For example, if you and your friend decide to invest in a buy to let property, and you put up 70% of the purchase price, and your friend contributed 30%, you would own 70% and your friend 30%, and you would be taxed accordingly.  

If you are married or in a civil partnership, different tax rules will apply to your rental income from jointly owned property.

Rental income tax implications for couples

If you and your spouse or civil partner live together and are joint owners of one or more properties, HMRC will treat rental income from the properties as if it belonged to both of you equally, and you would be taxed on an equal basis.  

You will each have 50% of the rental profit added to your taxable income. This applies whatever the percentage ownership actually is for each of you. 

So for example, if you own 75% and your spouse or partner owns 25%, the rental profit would still be treated by HMRC as 50% each for the purposes of income tax. 

Can we choose a different split? 

Yes. If you are joint owners of the property with unequal shares, this is not a tax-efficient way of paying rental income tax if you are in different income tax bands, or your partner or spouse has no taxable income. 

You can choose to be taxed in direct relationship to the actual percentage ownership by completing a Form 17, which can be accessed via this link: declaration of beneficial interests in joint property and income (form 17). The form needs to be with HMRC within 60 days of the date it is signed.

When making the Form 17 Declaration, you also need to provide HMRC with legally valid evidence that your shares are unequal, for example, by a Deed or Affidavit. This does not affect the actual legal ownership of the property, which in law is still jointly owned.  

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