Tax Chat

Tax savings from jointly held property

A tax saving might be available where a rental property is transferred from one spouse into the joint ownership of the married couple or civil partners.

The tax saving arises if the transfer means that part of the income will be taxed on a spouse or partner with a lower marginal tax rate.  There may also be a CGT saving on the eventual sale of the property for the same reason.  Also up to two annual CGT exemptions, covering gains of up to £10,600 each, and two lots of private lettings relief, covering gains of up to £40,000 each may be available to reduce the taxable capital gain.

UK land can be held as joint tenants or as tenants in common.  Under a joint tenancy the owners hold an equal undivided interest in the whole property, as tenants in common the individuals hold separate and identifiable shares in the property.  However where the owners are either married or in a civil partnership HMRC will treat the property as being held in equal shares regardless of the actual ownership.

However it is possible to reflect the actual ownership for tax purposes by making an election. This allows you to be taxed on the rents from the actual interest that you hold.  This is a joint election signed by both spouses / civil partners.  In addition HMRC will require evidence of the actual beneficial interest held by each person to be submitted along with the election.  This might be a copy of the property deeds or the purchase document.

For further information or to discuss, please contact Lesley Sutton on 01484 550037 or taxchat@revellward.co.uk