How to Report Jointly Owned Rental Income in the UK

Rental income from jointly owned property must be accurately reported for Self Assessment in the UK. The rules for declaring shares of rental income depend on how the property is owned and whether the owners are married or in a civil partnership. Below is a detailed guide to help you navigate the process.

1. Reporting Rental Income for Married Couples or Civil Partners

For married couples or civil partners, the following rules apply:

• Default Rule (50/50 Split):
  • Rental income is automatically split 50/50 between spouses or civil partners, regardless of actual ownership proportions.
  • This rule applies unless you elect to split the income differently.
• Changing the Split with Form 17:
  • If ownership shares are unequal, you can submit a Form 17 to HMRC to declare the actual ownership percentages.
  • Evidence of the ownership split, such as a declaration of trust or title deeds, must accompany the form.
  • Once Form 17 is filed, rental income must be declared according to the specified ownership shares.
• Key Points to Remember:
  • Form 17 must be submitted within 60 days of signing it.
  • This rule applies only to property generating rental income and does not affect other types of jointly held income.

2. Reporting Rental Income for Unmarried Individuals

For individuals who are not married or in a civil partnership:

• Ownership-Based Allocation:
  • Rental income is allocated based on actual ownership shares as determined by the property title or a formal agreement, such as a deed of trust.
  • For example, if the property is owned 70/30, rental income and expenses should be split 70/30 for tax purposes.

3. Expenses and Deductions

Expenses related to the rental property must be divided in the same proportions as the rental income. Common deductible expenses include:

• Mortgage interest
• Repairs and maintenance
• Letting agent fees

Each owner reports their share of income and expenses on their individual Self Assessment tax return.

4. Joint Tenancy vs. Tenancy in Common

Understanding the ownership structure of the property is crucial for correctly splitting rental income:

• Joint Tenancy:
  • Ownership is presumed to be equal (50/50 split) unless a declaration is made otherwise.
• Tenancy in Common:
  • Ownership shares are specified and can be unequal. These shares determine how rental income and expenses are divided.

5. Reporting in Self Assessment

Each owner must report their share of rental income and expenses under the property income section of their Self Assessment tax return. Rental profits are added to other income and taxed at the owner’s marginal rate.

6. Documentation to Keep

Maintaining accurate records is essential for compliance and future reference. Ensure you retain the following:

• Ownership documents, such as title deeds or declarations of trust
• Records of rental income received and expenses paid
• Form 17, if applicable

Correctly reporting rental income for jointly owned property can help you avoid HMRC penalties and ensure compliance with tax regulations. If you’re unsure about how to split or declare your rental income, please reach out to Helpbox UK today!