Tax on rental income from jointly owned property depends on ownership shares, unless part of a partnership. Married couples default to a 50/50 split unless they notify HMRC of a different income allocation based on actual ownership proportions.
When property is jointly owned with one or more individuals, the taxation of rental income depends on whether the rental activity is considered a partnership. Simply owning property together does not automatically qualify the arrangement as a partnership.
If the jointly owned property is not part of a partnership, the allocation of any profit or loss from the jointly owned property is typically based on each person's ownership share in the property. However, the co-owners can agree to divide the profits and losses differently than their ownership proportions, so it’s possible for one person to receive a larger or smaller share of the profits or losses than their share in the property itself. For tax purposes, the profit and loss share must reflect the actual agreement made by the owners.
In cases where the joint owners are married or in a civil partnership, the profits and losses are generally treated as being divided equally between them, unless:
- The entitlement to the income and the ownership of the property are split unequally between the spouses or civil partners, and
- Both parties must inform HMRC that they wish the division of profits and losses to align with their respective ownership shares in the property.
If these conditions are met, the profit and loss distribution will follow the agreed-upon ownership percentages, rather than the default equal split for married couples or civil partners.
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