Q My wife and I are going to purchase a house to rent out and we have a couple of questions.
Can we purchase the property with a 90% share in my wife’s name and 10% in my name? If we can do that can we be taxed on the rental income on the basis of the ownership shares, so 90% of the income is taxed at my wife’s tax rate and 10% income taxed at my tax rate?
A Yes, to both questions. You can buy property in unequal shares but only if you buy as tenants in common rather than as joint tenants of the property.
If you do own unequal shares in the property, because you are married HM Revenue and Customs (HMRC) will, as a default, treat the rental income as being split 50/50.
If you want to be taxed in a way that reflects your ownership of the property – so 90% of the income for your wife and 10% for you – you will need to fill in a “declaration of beneficial interests in joint property”. This is HMRC form 17.
Form 17 says you can use it only if you live together as a married couple or civil partners, genuinely hold the property in unequal shares and are entitled to an income split along the same lines. The evidence you need to provide when submitting form 17 to HMRC is either a declaration of trust stating your unequal shares or a copy of the Land Registry entry which shows how the property is split between you. Once you have completed form 17, it will be valid only if it is lodged with HMRC within 60 days of its completion.
Owners of unequal shares in a let property who are not married or in a civil partnership don’t need to bother with form 17 as any rental income is automatically taxed according to the shares owned.