How is rental income from jointly-owned property taxed?

Full answer

**The default 50:50 rule** For married couples and civil partners, HMRC automatically applies the 50:50 rule: each spouse is taxed on half the net rental income from jointly owned property. This applies even if the property is owned 90:10 or any other unequal split. **Overriding the 50:50 rule** Spouses can override the default by filing Form 17 with HMRC. This declares the actual beneficial ownership split, and rental income is then taxed accordingly. Crucially: - The declared split must match the genuine legal/beneficial ownership - A deed of trust or transfer of equity must be in place before filing Form 17 - Form 17 must be submitted within 60 days of the deed **Unmarried joint owners** For unmarried joint owners (siblings, business partners, cohabitees), there is no 50:50 default. Each person is taxed on their actual ownership share — typically as stated in the title register or a co-ownership agreement. **Example: Emma (basic rate) and David (higher rate) — married** They own a buy-to-let property equally. Net rental profit: £15,000/year. - Default (50:50): Emma pays 20% × £7,500 = £1,500; David pays 40% × £7,500 = £3,000. Total: £4,500. - After restructuring to 90% Emma / 10% David + Form 17: Emma pays 20% × £13,500 = £2,700; David pays 40% × £1,500 = £600. Total: £3,300. Annual saving: £1,200. **Beneficial vs. legal ownership** Legal title (what the Land Registry shows) and beneficial ownership (who actually has economic rights) can differ. A declaration of trust can sever these to achieve the desired split. Take legal advice before proceeding. **Interest relief** Note that mortgage interest relief is restricted to 20% basic-rate tax credit for residential buy-to-let properties — the split of interest costs must also be declared correctly when filing Self Assessment returns.

More answers

• What is Form 17 and when do married couples need to file it?