The Most Common Jointly Owned Property FAQs

The purpose of this guide is to provide some answers to some of the most common questions asked about joint property ownership, particularly when it comes to taxation.

What are the tax implications of owning a property jointly in the UK?

When you own a property jointly with another individual or individuals, you each have an equal share in the property for tax purposes. It is likely that you will have to pay income tax on any rental income you receive from the property, as well as capital gains tax if you decide to sell the property for a profit.

How is capital gains tax calculated on the sale of a jointly owned property?

It is important to note that if you sell a jointly owned property at a profit, you may have to pay capital gains tax on your share of the profit. The gain is calculated by subtracting the cost of the property from the sale price, as well as any expenses related to the purchase or sale of the property. The portion of the gain that each joint owner will receive is calculated based on the share of the property owned by each owner.

Are there any stamp duty exemptions for jointly owned properties in the UK?

In the UK, there are no specific stamp duty exemptions for properties that are jointly owned. Stamp duty may, however, be reduced if you are a first-time buyer or if the value of the property you are purchasing is less than the stamp duty threshold if you meet the restrictions.

How are rental income and expenses divided among joint owners of a property in the UK?

In the case of joint owners, the rental income and expenses are generally divided among them according to their ownership shares. It is possible for the joint owners to agree to a different arrangement, however.

Are there any inheritance tax implications for jointly owned properties in the UK?

In the UK, joint ownership of property may be subject to inheritance tax, depending on the type of joint ownership and the circumstances of the joint owners. To understand the implications of inheritance tax on jointly owned properties, it is recommended to seek the advice of a professional.

Can joint owners of a property in the UK file a joint tax return?

A joint owner of a property in the UK cannot file a joint tax return with their spouse or partner. There is a requirement that each owner of the property files their own tax return and declares their share of the rental income as well as their capital gains.

What happens to the tax liability in case of the death of one joint owner of a property in the UK?

In the event that one joint owner of a property in the United Kingdom dies, their share of the property as well as any possible tax liability will typically be transferred to their estate or to the surviving joint owner(s) in accordance with the terms of their will or joint ownership agreement.

Can jointly owned properties be transferred to another person without incurring tax implications in the UK?

There are a number of tax implications that can arise from transferring a jointly owned property to another person in the UK, such as capital gains tax and stamp duty. In order to understand the tax implications of transferring a jointly owned property to another person, it is recommended that you seek professional advice from a specialist property accountant.

Do you need to file a form 17 with HMRC if a property is jointly owned by spouses?

As a result of our extensive experience in dealing with HMRC on this matter, we are able to tell you that the property will always need to have a Form 17 on file for the spouses, regardless of whether the property is co-owned or solely owned before the Deed of Trust can be completed. In order to assist you in complying with this, the following guidelines have been provided: 

https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem9851

https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem9230

In the first link, you will find information about how to manage assets that are jointly owned between spouses.

What if only one spouse owns the property legally, and you want to amend the Deed of Trust so that both spouses constitute the beneficial owners according to the proportions stipulated in the Deed of Trust? A spouse who is the sole legal owner of the property in this situation will have to submit a Form RX1 to the Land Registry in order to update the property’s ownership status as soon as possible. A restriction of this kind is often referred to as a Form A Restriction, which is then recorded on the title register by the Land Registry. 

In the form RX1, there is a restriction that states that no disposition of a registered estate (other than a trust corporation) by a sole proprietor under which capital money arises is to be registered unless an order from the court is required.

For tax purposes, this means the property will now be treated as joint tenants in common. As you can see from the second link, this is highlighted at point 2. 

As the property is now held jointly for tax purposes, assuming the above steps are followed correctly, something which is clearly not happening with some advisers, we can simply follow the guidance as per both the first link and points 1 and 2 of the second link. It is clearly stated that, after signing a deed of trust for a property owned by a spouse, we must file a Form 17 with HMRC within 60 days. 

In order to submit Form 17 to HMRC, we must provide them with evidence of the uneven split, which is the Deed of Trust. 

If you need to implement a Deed of Trust, it is very important to make sure that the process is executed correctly. By not taking action, you leave yourself open to an inquiry by HMRC, giving them the opportunity to investigate you. Please do not hesitate to contact us if you have any questions or need any assistance.

If you found this article helpful then why not read our article on HMRC mortgage interest relief for 2020/21  or buying property through a limited company next?

Thandi Nicholls Ltd
Creative Industries Centre
Glaisher Drive
Wolverhampton
West Midlands
WV10 9TG