If you own rental property with your spouse or civil partner, you will usually be taxed 50:50 on any income, even if you own different shares.  However you may be able to change the split of your income to your actual share of ownership – provided you meet HMRC’s rules.

The standard tax treatment for couples living together, whether married or in a civil partnership, is that property income held jointly is split evenly, regardless of the actual ownership proportion.

However, if the ownership is unequal and you and your spouse or civil partner wish to have the income taxed in line with your respective shares, you must notify HMRC and provide evidence of the unequal beneficial interests in the property.  This is done by submitting Form 17, which declares the beneficial interests in joint property and income.

A Form 17 declaration can only be made by spouses or civil partners living together who own property in unequal shares, with the income allocated in proportion to these shares.  Couples who are separated or in other types of relationships are not eligible to submit a Form 17 declaration.

The declaration is only valid if both partners agree.  If one partner disagrees, the income will continue to be split 50:50, regardless of the ownership structure.

Once submitted, a Form 17 declaration remains in effect until there is a change in your status, such as separation or divorce, or a change in the ownership structure.  If either of these occurs, the 50:50 income split will be reinstated.

There are specific situations in which Form 17 cannot be used, such as when spouses or civil partners own property as beneficial joint tenants, income from shares in a close company or for partnership income.

In cases where property is owned in unequal shares, submitting a Form 17 declaration can offer tax benefits under certain circumstances.

If you would like more information about this topic, please get in touch.

Internet link: GOV.UK