Jointly owned property…and taxJun. 21, 2017, 2:19pm
What if you own an investment property and you pay higher rate tax on the rental income generated, but your wife or husband has unused personal allowance or basic rate band?
It would make sense for him or her to have some of the rental income. However, what if you want to leave the property on your death to children from a previous marriage. What can you do?
With some exceptions, there is a general presumption that spouses and civil partners who jointly own property own it, and the income which flows from it, on a 50:50 basis. This is why couples who wish to share and be taxed on income otherwise than on a 50:50 basis have to effect a change to the beneficial ownership of the asset and then make a declaration to HMRC using Form 17.
This 50:50 rule can work to your advantage. If you transfer the investment property into joint ownership, with your wife or husband, so that you retain beneficial ownership of 99% of the property and your wife or husband has 1% then, in the absence of a Form 17 declaration, you as a couple will be taxed on the income on a 50:50 basis but you are still in a position to pass on 99% of the value of the property to your children.