Who should own the property?

Income from jointly owned properties is treated as received in equal shares unless an election is made to treat the income as split in the proportion of beneficial ownership. The election must be made to HMRC within 60 days of the change, you must be entitled to the income in unequal shares and you must elect in the proportion of the beneficial interest. You cannot simply choose to have the income split on an unequal basis because it may be tax efficient. There are different rules if it is a business partnership (see below).

However, you can make the equal split work to your advantage shown by the following example:
Joseph is a married man who is a higher rate taxpayer. His wife, Sharon has no income. Joseph owns a property and he receives all the rental income. He, naturally, wants to reduce his tax liability but retain his income and capital. He decides to transfer 1% of his property to Sharon. Joe instructed a solicitor to make the transfer so Joe owned 99% and Sharon 1%.
Joseph and Sharon then received the income in this proportion. They could elect for the income to be taxed in this proportion. However, if no election is made, the income is taxed 50% on Joseph and 50% on Sharon. There will, therefore, be a tax saving of up to 40% on half of the income. But Sharon may not be happy with a tax liability on 50% of the income (assuming it produces a liability) when she is only receiving 1%!  Joseph would probably need to compensate Sharon for any tax liability that arises. Joseph also needs to bear in mind that Sharon could prevent a sale even though she only owns 1%!

If one or both of you own a property, you may wish to review the way in which you own it. As a married couple, you can transfer a property into joint names or sole names without a Capital Gains Tax liability. You may wish to transfer a property in the sole name of one spouse into joint names just before you sell the property to take advantage of the two annual Capital Gains Tax exemptions, as mentioned above. If one of you has lived in the property in the past, then care needs to be taken as principal private residence relief may not be available to the other partner so there could be a significant increase in the tax payable overall. This rule was changed on the 6th April 2020 whereby the transferee spouse takes over the residence relief use of the property from the transferor spouse.

Care does need to be taken because if you do the transfer in anticipation of a sale, HMRC may question the transfer under anti-avoidance rules. You would also need to ensure that any income received after the transfer is divided equally (or in the relevant proportion if an election is made).

If you gift an asset to any other person apart from your spouse (for example your child) then there will be a Capital Gains Tax implication and you need to read the paragraph below under Unmarried couples and other non-business relationships.

The rental income is assessed on the basis of the entitlement or receipt of the income. Normally receipt and entitlement are the same thing. However, you may choose to have all the income paid to one partner so that there is a tax saving. You would need to ensure that the relevant partner actually received the income into his/her sole bank account, declared it on his/her tax return and we would recommend that there is an agreement in writing. This could not be done in the case of a married couple. The example of Joseph and Sharon above does not apply to unmarried couples.

There are different rules if it is a business partnership (see below).

The cost of a declaration of trust can vary depending on various factors. Here are some key points to consider:

• The cost of a declaration of trust can depend on the complexity of your situation and the specific requirements of the trust.
• It is advisable to seek professional advice from a solicitor or a specialist in trust law to draft a declaration of trust tailored to your needs.
• Solicitors’ fees for drafting a declaration of trust can vary, and it is recommended to obtain quotes from different professionals to compare costs.
• The fees for a declaration of trust may also depend on the value of the property involved and the extent of legal work required.
• It is important to note that the cost of a declaration of trust is a one-time expense, but ongoing administration and management of the trust may incur additional fees.

To get an accurate estimate of the cost of a declaration of trust for your specific circumstances, it is best to consult with a solicitor who specializes in trust law. They will be able to provide you with personalised advice and a breakdown of the associated costs.