Tax Tips For Landlords – 8. Joint Spouse/Civil Partnership Ownership (1)
By default, rental profit from property jointly owned by spouses/civil partners is taxed 50:50 irrespective of the underlying respective proportion of actual ownership (this does not apply to property held within a business partnership proper or with the commercial letting of furnished holiday accommodation).
However, if it would be more income tax efficient for the split of profit to be different, then the profit may be divided according to actual ownership once HMRC has been notified. A couple may change the underlying ownership to suit but note that such unequal ownership can be achieved only if the property is held as ‘tenants in common’.
A Form 17 ‘Declaration of beneficial interest in joint property and income’ must be filed with HMRC within 60 days of the date of its signature (this restriction is strictly applied), together with evidence of the respective beneficial interests (e.g. the signing of a declaration of trust or a deed of arrangement, which may be years old).
A Form 17 is purely a declaration of interest for tax purposes and comes into effect from the date of signature (i.e. it cannot be backdated) and it remains in place until a replacement form is submitted. A Form 17 cannot be used to change the income split back to 50:50 unless either the interests in the property or income change or the owners stop living together as a married couple/civil partners or one of the joint owners’ dies.
ven the smallest change in interest cancels the declaration and without submission of a subsequent form, the 50:50 split will automatically apply. On death or permanent separation, the income is split as to the beneficial interest.