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Landlords – Joint Ownership Types for Rental Properties

By November 14, 2023No Comments

Considering sharing a rental property with someone? Jointly owning a property is a viable option for many landlords and individuals, and in England and Wales there are two ways that this can be done.

In this blog post we’ll outline these two types of joint ownership and we’ll discuss key considerations of each. However, it’s important to note that ownership types are highly complex and should be considered on a case-by-case basis – the most suitable type will vary on so many individual factors so we recommend seeking legal and financial advice when trying to decide which would suit your individual circumstances best.

The two types of joint ownership

In England and Wales there are two types of joint ownership: ‘joint tenants’ and ‘tenants in common’. 

Joint tenants:

This is usually (but not always) set up by those who own a property with a spouse or civil partner. You may also see it referred to as ‘beneficial joint tenants’. Each owner will have equal property rights and if one owner dies the other owner will automatically own the whole property – you can’t pass your ownership over to someone else in your will.

Tenants in common:

This typically tends to be preferred by owners that are unmarried, by owners contributing towards the property in unequal amounts or by those purchasing a property with multiple other owners. Each owner will have a separate share – this doesn’t have to be equal, your share won’t automatically be passed on to the other owner in the event of your death and you can pass on your share to others in your will.

Allocating profit from rental income

Here’s where it can get even more complex and can be affected by the nature of your relationship and by how your joint ownership is set up. Let’s take a look at some examples.

Owning a property with your spouse or civil partner

If you own a property with your spouse or civil partnership, profit is split evenly by default – even if this differs to the underlying ownership shares. This isn’t always the most tax-efficient way of allocating profit but you can change this allocation in certain situations. 

  • If you’re in a ‘tenants in common’ ownership agreement and your underlying ownership shares are unequal: you can apply to change the rental profit allocation to match your ownership shares via a Form 17. 
  • If you’re in a ‘joint tenants’ ownership agreement: you cannot apply to change your allocation of rental profits as it can only ever be split equally. However, there is some leeway here. It’s possible for spouse or civil partner owners to take advantage of the CGT ‘no gain/no loss’ rules to make their rental income split more tax efficient. However, it’s important to note that whilst this might be beneficial for some, there are implications involved so you’ll really need to weigh up the pros and cons of this route. 

Owning a property with someone who isn’t your spouse or civil partner

There’s a bit more flexibility here. Rental profits are usually allocated based on each person’s share of the property but you can decide to split this differently, in which case each individual will be taxed on the income they receive.  

Your best bet – seek an accountant’s advice!

As we’ve shown here, landlord accounting can be incredibly complex and it isn’t always easy to know what the best course of action is. Here’s where your accountant or financial advisor becomes your best tool in your toolbox! Seeking professional advice is the most effective way to ensure that you’re maximising your financial opportunities, minimising your tax liability and remaining compliant with complex tax rules and legislation. Visit our website to find out more about our accounting services for landlords and what we can offer you, or get the ball rolling by setting up a free, no-obligation consultation with a member of our experienced and dedicated team who will discuss your individual requirements in more detail.

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