Category: FHL

How Landlords Can Legally Reduce Tax by Changing the Split of Rental Income

a couple saving tax on their property investment

A Complete Guide to Form 17, Deeds of Trust and Beneficial Ownership

If you own a rental property jointly with your spouse, civil partner or partner, you could be paying more Income Tax than necessary.

Many landlords assume rental income must always be split equally between the owners. In fact, the tax position depends on who owns the property, how it is owned and whether you are married or unmarried.

Since the abolition of the Furnished Holiday Letting (FHL) tax regime from 6 April 2025, understanding these rules has become even more important. Many former holiday-let owners who never previously needed to think about Form 17 may now need to review how their rental income is taxed.

The good news is that, with the right ownership structure and careful planning, many landlords can legitimately reduce their family’s overall tax bill.

The key is getting the ownership structure right before submitting tax returns.

Harry and Megan’s Story

Let’s start with a typical example.

Harry earns £130,000 a year and pays Income Tax at the additional rate.

Megan earns £22,000 and pays tax at the basic rate.

Together they own two buy-to-let properties producing rental profits of £30,000 a year.

They assume the profits must be split equally.

Many landlords do.

But depending on their circumstances, that may not be the most tax-efficient solution.

Whether they can change the split depends on one important question…

Are they married?

The answer completely changes the tax rules.

Could You Save Tax?

Decision Tree

Why Does This Matter?

Imagine rental profits of £30,000.

OwnerEqual Split90/10 Split
Harry£15,000£3,000
Megan£15,000£27,000

The actual tax saving depends on each person’s wider tax position, but where the legislation allows a change in beneficial ownership, the family’s combined Income Tax liability could be significantly lower.

Of course, tax should never be the only consideration. Changing ownership may also affect Capital Gains Tax, Stamp Duty Land Tax and Inheritance Tax.

Married Couples and Civil Partners

This is where many landlords are surprised.

Most people assume that tax follows ownership.

For married couples, it often doesn’t.

Where spouses or civil partners live together, HMRC normally taxes income from jointly owned property 50:50, regardless of the actual beneficial ownership, unless the statutory exception applies.

For example:

Beneficial OwnershipHMRC Default Tax Position
Husband 90%50%
Wife 10%50%

Many landlords don’t discover this until after filing their tax returns.

Form 17 Explained

Fortunately, HMRC allows married couples and civil partners to be taxed according to their actual beneficial ownership.

This is done by submitting Form 17. https://www.gov.uk/government/publications/income-tax-declaration-of-beneficial-interests-in-joint-property-and-income-17

If you want to change the ownership split, the beneficial ownership must first be changed and properly documented — commonly using a Deed or Declaration of Trust. Married couples and civil partners then use Form 17 to ask HMRC to tax the rental income in those actual ownership proportions.

Form 17 does not create or change beneficial ownership. It tells HMRC to recognise unequal beneficial ownership that already exists. If you currently own the property 50:50 and want a 90:10 split, the ownership must be changed first and supported by appropriate evidence.

To use Form 17:

  • the property must genuinely be owned in unequal beneficial shares;
  • those shares must be supported by legal evidence, usually a Deed of Trust;
  • Form 17 must normally reach HMRC within 60 days of being signed.

⚠ Important

Form 17 does not change ownership.

It simply tells HMRC how you already own the property.

Many people get this the wrong way round.

The April 2025 FHL Changes

One of the biggest changes affecting landlords has received surprisingly little attention.

Until 5 April 2025, Furnished Holiday Lettings were taxed under a separate regime.

From 6 April 2025, that regime was abolished.

Former FHL properties are now generally taxed in the same way as other residential lettings.

For many married couples this means that, if they wish to be taxed other than 50:50, they will normally need:

  • unequal beneficial ownership; and
  • a valid Form 17 declaration.

If you owned an FHL before April 2025, now is a good time to review your ownership structure.

Unmarried Couples

The rules are completely different.

This catches many landlords out.

Unmarried couples cannot use Form 17.

Instead, HMRC taxes rental income according to the actual beneficial ownership.

Suppose Harry and Megan own a rental property.

Harry owns 80%.

Megan owns 20%.

The rental profits are normally taxed:

  • Harry – 80%
  • Megan – 20%

There is no Form 17.

No declaration is sent to HMRC.

The ownership simply needs to be properly documented.

What Is a Deed of Trust?

A Deed of Trust records the beneficial ownership of a property.

It is often used where co-owners wish to hold different ownership percentages.

For example:

  • 50/50
  • 80/20
  • 90/10
  • 99/1

A properly drafted Deed of Trust can provide the evidence HMRC expects where beneficial ownership is unequal.

However, it is far more than a tax document.

Changing beneficial ownership may also affect:

  • Capital Gains Tax
  • Inheritance Tax
  • Stamp Duty Land Tax
  • divorce settlements
  • entitlement to future sale proceeds

Professional advice should always be taken before changing ownership.

Don’t Forget Stamp Duty Land Tax

Many landlords overlook SDLT.

Where there is an outstanding mortgage, changing ownership percentages can sometimes trigger SDLT because one owner is treated as taking responsibility for a greater share of the mortgage debt.

This can arise even where no money changes hands.

It’s another reason why tax and legal advice should be taken before signing a Deed of Trust.

Seven Expensive Mistakes Landlords Make

❌ Assuming Form 17 changes ownership.

❌ Filing Form 17 without changing beneficial ownership.

❌ Missing the 60-day deadline.

❌ Assuming unmarried couples can use Form 17.

❌ Forgetting the FHL rules changed from April 2025.

❌ Ignoring SDLT implications.

❌ Downloading a template Deed of Trust from the internet without taking advice.

The Biggest Tax Mistakes Made by New Landlords – Steve J Bicknell Tel 01202 025252

Planning Opportunity

Sometimes changing the ownership percentages is the right answer.

Sometimes it isn’t.

If:

  • one owner pays additional-rate tax;
  • you’re planning to build a larger property portfolio; or
  • you’re buying more rental properties,

it may be worth considering whether holding future properties through a limited company would be more tax-efficient.

This isn’t the right solution for everyone, but reviewing the options before purchasing another property can avoid expensive restructuring later.

For more information, read our article:

Tax Benefits of Incorporating Your Property Portfolio https://stevejbicknell.com/2025/05/03/tax-benefits-of-incorporating-your-property-portfolio/

Married or Unmarried? At a Glance

QuestionMarried / Civil PartnersUnmarried Couples
Default tax split50:50Beneficial ownership
Form 17 available?YesNo
Deed of Trust useful?YesYes
Can ownership percentages differ?YesYes
SDLT implications possible?YesYes

Frequently Asked Questions

Can Form 17 be backdated?

No. HMRC requires the declaration to be submitted within the statutory time limit.

Can unmarried couples use Form 17?

No.

Does Form 17 change ownership?

No.

Does a Deed of Trust change ownership?

Yes, it records the beneficial ownership between the parties.

Can changing ownership trigger SDLT?

Yes, particularly where a mortgage exists.

How We Can Help

At Bicknell Business Advisers, we regularly advise landlords and property investors on:

  • Form 17
  • Beneficial ownership
  • Deeds of Trust
  • SDLT planning
  • Capital Gains Tax
  • Property ownership structures
  • Incorporation planning

The best time to seek advice is before ownership changes are made.

A short planning meeting today could save tax for many years to come.

About the Author

Steve Bicknell FCMA, CGMA is Managing Director of Bicknell Business Advisers Limited, specialising in property taxation, SDLT, Capital Gains Tax and tax planning for landlords, developers and property investors throughout the UK.

Making Tax Digital for Income Tax – Understanding Quarterly Updates

From 6 April 2026, Making Tax Digital for Income Tax (MTD for Income Tax) is mandatory for sole traders and landlords with annual income over £50,000.

Under MTD for Income Tax, taxpayers are required to keep digital records and submit quarterly updates to HMRC using MTD-compatible software. But what are quarterly updates, and when is the first filing for 2026/27 due?

What is in a quarterly update?

MTD for Income Tax requires sole traders and landlords to report on a quarterly basis to HMRC.Each update is cumulative across the year. That means that, for each update period, you will report:

  • your self-employment or property income and expenses from the previous three months,
  • plus the total of your previously reported trade or property income and expenses for the tax year,
  • and any corrections made to those figures.

No accounting or tax adjustments are necessary before sending a quarterly update to HMRC.

What are the update periods?

There are two update periods under MTD for Income Tax. The standard update period is based on the tax year, and looks as follows:

Table 1

However, if a taxpayer chooses (and if their MTD software has the capability) it’s possible to send quarterly updates on a calendar basis instead. This can be particularly useful for businesses that prepare accounts to 31 March.

The submission period for a calendar update period is:

Table 2

In both cases, the submission deadline is the same. This means a business using a calendar update period actually has a few extra days each quarter to prepare their update.

Do I need to submit anything other than quarterly updates?

Yes. After the fourth quarterly update has been filed, you should make any tax or accounting adjustments to your figures, as well as add in any additional income sources that aren’t reported as part of MTD for Income Tax (e.g. pension income, employment income, interest income etc), and claim any tax reliefs to which you’re entitled, such as capital allowances.

This is known as the ‘final declaration’ and works as the MTD version of your self-assessment tax return. The deadline to submit a final declaration is the same as the online filing deadline for self-assessment tax returns – 31 January following the tax year end.

I am a sole trader and also receive property income. Do I need to submit multiple quarterly updates?

Yes. Separate quarterly updates need to be submitted for each trade or property business. That means if you earn trading income as well as rental income, you will need to send 8 quarterly updates across the tax year.

Need help with Making Tax Digital for Income Tax?

Looking for more information on what you need to include in your quarterly updates? Book some time to speak with a member of our team today – we’d be happy to guide you through the Making Tax Digital filing process.

How Section 24 Affects Property Investors – What You Need to Know

Property investment remains one of the UK’s most popular routes to building long-term wealth—but recent tax changes have significantly impacted profitability. One of the most important changes affecting landlords is Section 24 of the Finance (No. 2) Act 2015, commonly referred to as the “mortgage interest relief restriction.”

This restriction now affects Furnished Holiday Lets as well as Buy to Lets and HMO’s.

The changes to Holiday Lets and Serviced Accommodation are covered in this blog.

Holiday Lets – Good news for Capital Allowances – Steve J Bicknell Tel 01202 025252

More details on Section 24 are in this blog

Residential Letting – What is the Finance Cost Allowance and how are Unused Finance Costs used up? – Steve J Bicknell Tel 01202 025252

If you’re a portfolio landlord or considering property investment, understanding Section 24 is essential for financial planning and compliance.

❓ What is Section 24?

Introduced in 2017 and phased in over four years, Section 24 removes the ability for individual landlords to deduct all of their mortgage interest from rental income before calculating their income tax.

Instead of full relief, landlords now receive a basic rate tax credit (20%) on their finance costs.

💡 Why It Matters

If you own property in your personal name, this change can push you into a higher tax bracket—even if your real profits haven’t changed.

Example:

  • Rental income: £40,000
  • Mortgage interest: £25,000
  • Before Section 24: You paid tax on £15,000
  • Now: You pay tax on the full £40,000, then receive a 20% credit on the £25,000 mortgage interest

This could increase your tax bill substantially, especially for:

  • Higher rate taxpayers
  • Portfolio landlords with significant debt
  • Those receiving child benefit or working tax credits, where higher income triggers a clawback

🏛️ Company Ownership as an Alternative

Many investors are now considering buying property through a limited company, which is not affected by Section 24.

Key benefits:

  • Mortgage interest remains fully deductible
  • Corporation tax applies (currently 19–25%)
  • Potential long-term inheritance tax planning advantages

But it’s not right for everyone—incorporation involves costs, complexity, and potential capital gains tax (CGT) or stamp duty implications.

🔎 What Should You Do?

A professional review is essential. At Bicknell Business Advisers, we help landlords and property investors across the UK understand:

  • How Section 24 affects your tax position
  • Whether incorporation is right for you
  • How to structure your investments tax-efficiently
  • Planning strategies to reduce your tax exposure

📞 Book a Free Consultation Today

If you’re unsure how Section 24 is impacting you, or want to explore your options, get in touch today.


📞 Call: 01202 025252
🌐 Visit: www.bicknells.net

At Bicknell Business Advisers, we specialise in helping landlords and property businesses navigate complex tax legislation with clarity and confidence.

Holiday Let – anti-forestalling rule

The March 2024 Budget was bad news for Furnished Holiday Lets (FHL)/Serviced Accommodation.

Abolition of the Furnished Holiday Lettings (FHL) tax regime

As announced at Spring Budget 2024, the government will abolish the Furnished Holiday Lettings tax regime, eliminating the tax advantage for landlords who let out short-term furnished holiday properties over those who let out residential properties to longer-term tenants. This will take effect from April 2025.

Draft legislation will be published in due course and include an anti-forestalling rule. This will prevent the obtaining of a tax advantage through the use of unconditional contracts to obtain capital gains relief under the current FHL rules. This rule will apply from 6 March 2024.

https://www.gov.uk/government/publications/spring-budget-2024-overview-of-tax-legislation-and-rates-ootlar/spring-budget-2024-overview-of-tax-legislation-and-rates-ootlar

The advantages likely to be affected are:

• Interest incurred on borrowings is fully deductible against taxable profits
• Beneficial capital allowances rules allowing tax relief for fixtures
• Various capital gains tax reliefs, including potential for business asset disposal relief (10% rate on sale), rollover relief and gifts hold-over relief
• Profits from FHLs can be treated as relevant earnings for pension purposes
• Income from a FHL held jointly by a married couple or civil partners is not caught by the default 50:50 split for income tax purposes

The anti-forestalling Rule

We are still awaiting the detail, but its likely that FHL’s owned by companies will not be affected by the changes. That means that company ownership would be the best option.

The anti-forestalling rule seems to prevent conditional contracts but it may still be possible to simply sell your FHL to your own company at an arms length market value, this would incur stamp duty but if the rules don’t come in to force until 2025 you might get Incorporation Tax Relief or Business Asset Disposal Relief which would save Capital Gains Tax.

As the rules are likely to be out soon its best to wait before taking action.

Time to Plan

Now is the time to consider

  • The impact of the changes on your tax
  • Whether to sell
  • Whether to sell to your own Company
  • Whether to change the use to Assured Short Term Tenancies

Working out your plan now could save you considerable tax in 2025.

steve@bicknells.net

What are the occupancy conditions for holiday lets?

tender traveling woman on board of sailing yacht

If you own a furnished holiday let in the UK, it’s important to understand the occupancy rules set out in the HM Revenue & Customs (HMRC) HS253 guidelines. Meeting these conditions can make your holiday let a profitable and tax-efficient business. In this post, we’ll explain what the occupancy rules are, what records you need to keep, when you can use a grace period, and how to monitor your occupancy, along with some examples of records.

Occupancy Rules

To qualify as a furnished holiday let, your property must be:

  • available for bookings for at least 210 days per year
  • rented out to paying customers for at least 105 days of the year
  • lettings that exceed 31 continuous days must not exceed more than 155 days during the year. Lettings exceeding 31 days don’t count as holiday lets unless there are unforeseen circumstances.

If your property meets these criteria, you can take advantage of certain tax benefits, such as:

  • claiming capital allowances on furnishings and equipment – these allowance can be substantial where a previously residential property is changed to Holiday Lets (Serviced Accommodation)
  • paying business rates rather than council tax
  • Business Assets Disposal Relief
  • Business Asset Rollover Relief
  • Gift Holdover Relief
  • Splitting profits with your spouse without needing a Form 17
  • Full recovery of Mortgage Interest

Record-keeping

To prove that your property meets the occupancy rules, you need to keep accurate records. These should include:

  • all rentals, including dates and names of customers
  • evidence of the availability of the property for rent, such as an online listing or booking system
  • any periods when the property was unavailable for rent, such as maintenance or personal use

Monitoring occupancy

To ensure that you meet the occupancy criteria, it’s important to keep track of your bookings and availability. You can use a booking calendar to monitor the number of days your property is rented out and avoid exceeding the 31-day limit. There are also software programs that can help you manage your bookings and maintain records.

Examples of records

Here are some examples of records you should keep:

  • A record of all bookings, including the dates of arrival and departure, and the names of the customers
  • An availability calendar that shows when the property is available for rent
  • Invoices and receipts for all expenses related to the property, such as maintenance, cleaning, and repairs

Many operators use Channel Managers such as

Airbnb and Vacation Rental Channel Manager Feature – Guesty

or property managers for example

Book Your Stay | Property management — Grandeur Property

Or you could use systems like

Bedful Booking System

These will easily link to modern accounting systems like Accounting Software – Do Beautiful Business | Xero UK

Conclusion

Meeting the HMRC’s furnished holiday let occupancy rules can help you run your holiday let as a profitable and tax-efficient business. By keeping accurate records of your bookings, availability, and expenses, you can ensure that you meet the criteria and take advantage of the tax benefits. With the help of software and a good booking calendar, you can monitor your occupancy and avoid exceeding the 31-day limit.

steve@bicknells.net