Just focusing on income tax, HMRC assume that when you buy a property/investment property its owned 50/50 between husband and wife or civil partners living together, this set out in the Income tax Act s 836. However, this rule will not apply in any of the following instances:
- the income is from furnished holiday lettings;
- there is actually a partnership in which case the income is divided according to the terms of the partnership agreement;
- both husband and wife, or both civil partners, have signed a declaration stating their beneficial interests in both the property and the income arising from it.
When you make a declaration it must apply equally to ownership and income and a couple must be married or civil partners, you can’t be separated or divorced or joint tenants.
Form 17 must be submitted with in 60 days of completion, in addition a Declaration of Trust is likely to be required.
If there is a change, even a minor change, after submitting the Form 17 it will be invalid and revert to 50/50.
If the property is held in a single name it may be possible to use a declaration of trust to confirm joint beneficial interest.
Income Tax and Capital Gains Tax will be be based on the beneficial interest in the property, so if one spouse is a higher rate tax payer and the other a lower rate tax payer changing the proportion of ownership could have a significant tax advantage.
There is no default ownership for unmarried property owners.
Property owners may also need to agree the split with their mortgage lender.
For more detailed guidance read this advice from HMRC https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem9000
steve@bicknells.net
