Tax and how to report rental income on jointly owned properties to HMRC

If you’re wondering how you should report rental income on jointly owned properties, this article will hopefully help guide you through the maze.  

Jointly-owned property is where a property is owned by more than one person. If it’s a property that you rent out, it can be a reliable source of income. Owning a property with someone else is quite common with married couples, with each person contributing to the mortgage, but friends and colleagues also buy properties together for a variety of reasons.

Does this have tax implications?

In tax terms, the fact that the property is part-owned by more than one person means that the property income and expenditure is split between the owners by the ratio of ownership for that property.  So, for example, if one person owns 75% of the property while the other owns 25%, income and expenses are split 75/25 between the two owners.

However, HMRC’s default position is that where someone lives with a spouse or civil partner – and has income from property which is in joint names – there are special tax rules. These say that the income must be split and taxed in equal shares (50:50).

If you own the property in unequal shares, or if one of you is or has become a lower or basic rate taxpayer, it may be worth reviewing who is to receive future rental income for tax purposes and altering the beneficial ownership of the properties concerned to reflect this.

The income from it can be apportioned based on those shares and taxed on that basis. You would need to demonstrate and provide proof that you are entitled to receive income generated from the property in unequal shares rather than split 50:50 and fill in a declaration of trust.

To notify HM Revenue and Customs (HMRC), you should complete a declaration of beneficial interests in joint property and income (form 17).

What does this mean for your tax return?

If you are a part-owner of property, rental or otherwise, then you will have to split all of the rental income and expenditure from the property between you and the other owner(s), according to the amount you own, with each of you submitting a separate tax return.

How untied makes light work of tax for joint- owned properties

untied is the only end to end app that easily connects users’ bank accounts via open banking and enables them to tag income and expenses. This makes recording rental income taxed on jointly owned properties very easy, particularly as we also have a facility that enables you to split transactions – by amount or percentage – if needed. See here for more details on splitting and partially claiming.

We also provide a real-time view of how much tax users owe and enable them to submit their tax returns straight from a mobile or desktop.

You can sign up for a free trial here and start taking control of your taxes.

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