However, whilst most landlords are aware that income can be shared equally by married couples for tax purposes, we receive many phone calls at Less Tax 4 Landlords from landlords who are not aware of the possibility to make changes to this arrangement.
Changes to the default 50/50 split on property income can be declared using what’s known as Form 17.
Form 17 enables landlords to make changes to the default 50/50 split for tax purposes to reflect the actual ownership of the underlying assets. This is known as ‘actual basis’.
Where the partners have unequal income tax rates, it might make sense for the partner paying more tax to reduce their proportion of income by transferring a greater share of the beneficial interest in their property to their spouse or civil partner.
Given the section 24 tax changes, this can even result in the difference between a tax bill that the couple can afford to pay and one that sees them making a post-tax loss.
So what does Form 17 do?
You can submit Form 17 if you want to change the split of income to reflect your actual share of ownership, rather than being treated as if you own the property 50/50.
In order to change the split you’ll need to provide evidence that your beneficial interests are unequal in the form of a declaration or deed.
Here are the facts:
- Form 17 is only used if the beneficial interests are unequal
- Form 17 can be used on any type of property provided it is held ‘jointly’
- Form 17 cannot be used to change the income split back to 50/50
- The evidence of the unequal split e.g. declaration of trust can be years old
- You can do a deed of trust more than once
- The change in beneficial interests does not affect capital gains tax for married couples and civil partnerships though Stamp Duty Land Tax (SDLT) MAY arise if the transaction involves ‘chargeable consideration’ in the form of say a cash payment or transfer of debt
Form 17 should not be used if:
- Income is from commercial letting of furnished holiday accommodation
- Income is from a partnership
- Income is from shares in a company
- Property is held as beneficial joint tenants where you are both jointly entitled to the whole of the property and income. (You will need to change the title ownership from Joint Tenants to Tenants in Common in order to declare unequal interest in the property)
Form 17 can be completed online at https://www.gov.uk/government/publications/income-tax-declaration-of-beneficial-interests-in-joint-property-and-income-17, however if you are unsure whether you are paying the correct amount of tax, and are in any doubt about:
- your beneficial interest in property held in joint names
- your beneficial interest in income from such property
- whether you should complete Form 17
Then we recommend speaking to your current or local chartered accountant or solicitor first about Form 17.
If you are a portfolio landlord and a higher-rate tax payer then whilst Form 17 may help if your partner pays a lower rate of tax, it may not be the best option and consider taking our free initial assessment.
Any information on this website is for general guidance only. The information may come from multiple sources and is based on our understanding of current taxation, legislation and HM Revenue & Customs practice as at the date stated, all of which are liable to change without notice. Business, Personal Estate, Financial and Tax planning are complicated subjects and no two clients circumstances are the same; the impact on your situation will depend upon your individual circumstances and you should always seek coordinated advice before taking action.
Please note that Less Tax 4 Landlords do not provide execution-only accountancy services and will not provide advice on, or assist with Form 17 enquiries. We only offer services to landlords and property investors looking to build, run and grow professional property businesses for whom form 17 will not usually be applicable. Thank you.