Do you jointly let a property with another person?
If you do, the rules on completing your tax return will be different from people who own a property individually. So, if you have one or more joint rentals, read our handy guide on how to complete a tax return.
Is it a formal partnership?
The first thing to determine is whether you are in an official ‘partnership’ with the other party. If you own a property jointly with one or more other people, the way the rental income is taxed depends on whether there is a formal partnership in place.
If you own and let a property jointly, it does not automatically mean that there is a partnership in place. Most residential lettings aren’t set up as a partnership and so the jointly owned property will be included as part of your personal rental business profits.
Where there is no partnership in place, the share of any profit or loss arising from jointly owned property will normally be the same as the share that you personally own in the property being let.
However, it is possible for joint owners to agree a different division of profits and losses. Occasionally, therefore, the share of the profits or losses will be different from the share in the property. The share for tax purposes must be the same as the share actually agreed.
However, where the joint owners are husband and wife (or civil partners) profits and losses are treated as if the property is owned equally, unless:
- both entitlement to the income and the property are in unequal shares, and
- both spouses (or civil partners) ask their respective tax offices for their share of profits and losses to match the share each holds in the property.
If your only income from land and property in the UK comes from a jointly owned property, that share alone will form the rental business.
If you have other income from land and property in the UK, whether that is in your name alone or owned jointly with someone else, your share from the jointly owned property will form a part of your rental business along with the other income and expenses on any other properties which you own alone.
If it is a partnership
Less commonly, the joint letting may amount to a partnership. If this is the case, the share of the profit or loss must be kept separate from any other letting income. A partnership loss cannot be deducted from a personal rental profit and vice versa.
Taxpayers who have jointly owned property should know who is keeping the records and have access to them. They are personally responsible for including their share of the income in their own tax return even if they agree that someone else will keep the records.