Property Income Efficiency Report
Property Income Efficiency Report
Stop paying more tax than you need to on rental income.
If you own rental property jointly, the way the income is split decides how much tax you pay on it.
Married couples and civil partners are taxed half and half by default, whatever the ownership. Where one pays at a higher rate, that costs you money every year for no good reason.
For spouses and civil partners the split is changed by a Form 17 declaration, supported by a declaration of trust evidencing unequal beneficial ownership. It takes effect only from the date of the declaration, and only if it reaches HMRC within sixty days. Where the person taking the larger share also takes on part of the mortgage, that is chargeable consideration for stamp duty land tax, chargeable at the additional dwelling rates where it is £40,000 or more. Severing a joint tenancy also ends the right of survivorship, so your will can deal with your interest in the property.
If you are not married or in a civil partnership, you are taxed on the shares you own. Changing them is a disposal at market value, without the no gain, no loss treatment married couples get, and a potentially exempt transfer, so the shares are usually best left as they are.
This report is for you if
- You own rental property jointly.
- You and the other owner pay tax at different rates.
- Nobody has checked whether the split is the right one.
A worked example
Rental income of £40,000 split equally gives you £20,000 each. If one pays at 40% and the other at 20%, moving £10,000 across saves up to £2,000 a year, provided it stays within that person’s basic rate band.
The split follows beneficial ownership, so 50:50 has to become nearer 75:25, and the mortgage interest restriction moves with it.
| Up to £50,000 | £1,000 |
| £50,000 to £100,000 | £1,500 |
| £100,000 to £200,000 | £2,000 |
| Above £200,000 | 1% |
Rent of £250,000 is in the top band: 1% of the whole, or £2,500.
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