What’s yours is mine –Joint property and Form 17

What’s yours is mine –Joint property and Form 17

Helen Thornley, Technical Officer at ATT, explains how joint assets owned by a couple can be treated for tax purposes

What’s yours is mine –Joint property and Form 17

There are a few quirks married couples and civil partners with joint assets need to be aware of. When it comes to the way any income arising on those assets is divided between them for income tax purposes, it is essential to get informed.

At our recent annual series of Tax Skills courses held in conjunction with the AAT, several attendees raised questions about how to treat the income from jointly held assets. This article looks at the issues involved and when a form 17 declaration is required.

How are couples with joint assets taxed?

The basic rule (As set out in s836 ITA 2007), which applies as long as the couple are married or in a civil partnership and living together, is that income from property held in both their names is split equally between them for income tax purposes.  This applies regardless of whether they are actually entitled to benefit equally from the property. Such jointly held property might include land and buildings, savings accounts, certain shareholdings and intellectual property.

There are some exceptions to this rule including:

  • Income from partnerships
  • Income from furnished holiday lets, whether in the UK or overseas
  • Income from jointly held shares in a close company
  • Income from an asset held for the couple by a nominee

Where this basic rule does apply, a couple who own an asset where one party is beneficially entitled to (say) 90 percent of the asset and the other to 10 percent, would each be subject to income tax on 50 percent of the income from the asset. On a sale or other disposal however, the capital gains tax position would still follow the underlying 90/10 split. The inheritance tax position would also be split 90/10.

If the couple wishes to be subject to income tax on their actual beneficial ownership instead of on the deemed 50/50 basis, then they need to make an declaration using form 17.

What does form 17 do?

Making a declaration using form 17 overrides the deeming rule. That means each of the couple is subject to income tax on their actual beneficial ownership. Making a declaration cannot change the beneficial ownership of the asset. If the couple owns the property 90/10, then they cannot use form 17 to declare a 25/75 split for income tax purposes.

When form 17 is completed, sufficient evidence must be sent to HMRC to confirm that the property is held in unequal shares. Such evidence might include a declaration of trust  – see below.

When is the declaration valid from?

The declaration can be made at any time. But it is important to note that the declaration only applies to income arising from the date of declaration. It cannot be backdated to change the tax position in previous years.

The declaration will take effect from the date that the last spouse signs it, provided that the form is submitted to HMRC within 60 days of that date. HMRC enforces the 60-day deadline very strictly. Generally, if the form is submitted late, the declaration is invalid and a new one must be prepared.

How long is any declaration valid for?

Once made, the declaration will continue to apply for subsequent tax years until either:

  • The couple separates permanently or divorce;
  • One spouse dies; or
  • The couple’s beneficial interest in the property changes.

As soon as any change is made to the actual beneficial interest, the existing declaration becomes invalid. Either the couple must accept a deemed 50/50 split, or make a fresh declaration. If the couple want to go back to the deemed 50/50 split, then changing the beneficial ownership by a fractional amount will bring the declaration to an end.

When might a declaration be helpful?

Where a married couple or civil partners hold income-producing assets such as rental property, there is often a desire to reduce their combined tax bill by adjusting the split of income between them. For example, where a couple own a rental property and one partner is a basic rate taxpayer and the other a higher rate taxpayer, ensuring that the lower earner is entitled to more of the rental profits will help to reduce the couple’s overall tax bill.

Where the higher earner owns the income producing asset outright, they could transfer a small share to the lower earner and then benefit from the deemed 50/50 split of income on jointly held assets. Or they could go further and transfer more than 50% of the asset to their spouse. Then they could use form 17 to elect for the income tax position to follow the actual beneficial ownership.

Before transferring property, all other tax and legal consequences of the change of beneficial ownership should be considered.

What other issues need to be considered?

If the couple wants to change their beneficial interests in an asset, they can either make a legal transfer between themselves in the appropriate manner for that asset, or make a declaration of trust which confirms the proportions in which the asset will be held going forwards. The latter approach is common for property, where a declaration of trust is usually cheaper then registering a legal transfer between the couple at the Land Registry. Unless the couple want the deemed 50/50 basis to apply, a form 17 is then sent to HMRC notifying the factual split for income tax purposes.

When transferring the beneficial interest between the couple, there are also non-tax factors to consider. Changing the ownership structure might affect:

  • Any mortgage secured on the property
  • The couple’s Wills, as it affects the property in their estate and what is then available to their beneficiaries. Particular care should be taken if the couple are leaving their assets to different beneficiaries, for example children of a previous marriage.
  • The split of assets on divorce/dissolution of civil partnership.
  • The capital gains tax on a future disposal and the availability of any possible reliefs such as Entrepreneurs’ Relief or hold-over relief.

A form 17 declaration is only valid where the asset is held as tenants in common and is not effective if the couple hold the asset as joint tenants. Tenants in common can pass on their shares in property by Will whereas joint tenants have equal rights to a whole property and their share automatically goes to the other owner(s) on death.


With careful planning, both the deemed 50/50 split and form 17 can be used to bring about the most efficient tax position for jointly held assets but the wider implications of ownership always need to be considered.



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