When property is jointly owned, the way rental income and capital gains are taxed depends on the ownership structure.
Income Tax on Rental Income
- Joint Tenants (50/50 split) – Income is automatically split equally between owners, regardless of actual contributions.
- Tenants in Common – Income is taxed based on ownership shares, which can be unequal. A Form 17 election can be filed with HMRC to reflect the actual ownership split.
Each owner must report their share of rental income and expenses on their Self Assessment tax return.
Capital Gains Tax (CGT) on Sale
- Each owner is taxed separately on their share of the gain.
- Private Residence Relief may apply if it was a main home.
- Each person benefits from their CGT annual exemption (£6,000 for 2024/25) before tax is due.
Inheritance Tax (IHT) Considerations
- Joint Tenants – Property passes automatically to the surviving owner.
- Tenants in Common – Shares pass according to the will or intestacy rules, potentially triggering IHT if the estate exceeds £325,000.
Tax Planning Tips
- Transferring ownership between spouses can reduce tax liability.
- Using mortgage interest relief and allowable expenses can lower taxable income.
- Seek professional advice to structure ownership tax-efficiently.
Understanding the tax implications of jointly owned property ensures compliance and helps minimize tax liabilities.
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