When purchasing a property with a spouse, civil partner, or business associate, the legal “default” is often set without considering long-term tax efficiencies. However, how you own your property today directly dictates your Inheritance Tax (IHT) exposure tomorrow.
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Joint Tenants vs. Tenants-in-Common: What’s the Difference?
There are two primary ways to hold joint property in the UK. Understanding the distinction is the first step in protecting your family’s wealth.
1. Joint Tenants: The “Automatic” Route
Under a beneficial Joint Tenancy, you and your partner do not have distinct, separate shares. You effectively own the whole property together.
The Survivorship Rule: If one owner passes away, the property automatically transfers to the survivor. The law overrides any instructions in a Will.
The Default: Unless specified otherwise, the Land Registry usually registers joint owners this way.
2. Tenants-in-Common: The “Flexible” Route
Tenancy-in-Common allows each owner to hold a specific, separate share (e.g., 50/50 or 70/30).
Control: You can leave your specific share to anyone you choose in your Will (e.g., children or a trust).
IHT Advantage: This is the preferred structure for maximizing the Residence Nil Rate Band (RNRB) and can often secure a 10–15% valuation discount from HMRC because a “partial share” of a house is harder to sell than the whole.
Why Consider “Severing” Your Joint Tenancy?
If you currently hold property as Joint Tenants, you can “sever” the tenancy to become Tenants-in-Common. This allows a deceased spouse to leave their share directly to descendants on the first death, ensuring tax reliefs are utilized fully before the estate grows too large.
The Process:
Notice: One owner provides written notice to the other.
Registration: An application is made to the Land Registry.
Will Update: You must update your Will to reflect who inherits your newly independent share.
How Oasis Can Help
Property is often a family’s most valuable asset. Would you like us to review your current Land Registry entries and coordinate with our legal partners to see if a change in ownership structure could save your family significant Inheritance Tax?
Disclaimer
This article is for general informational purposes only and is based on UK law (Law of Property Act 1925 and IHTA 1984). Property law in Scotland differs. Severing a tenancy can have implications for long-term care planning; therefore, professional advice is essential before making changes to property titles.
