Jointly Owned Properties: Making Tax Digital for Income Tax

Navigating the Rules for Co-Owners

Making Tax Digital for Income Tax (MTD for IT) already in place for landlords, where gross rents (and self employment income) are above £50,000 per annum. Joint property owners should take particular care to understand how the rules apply to them.

While owning a rental property with a spouse, partner, family member or friend can spread the investment risk. It will also create additional reporting responsibilities to HM Revenue and Customs (HMRC). A common misconception is that jointly owned rental property is automatically treated as a partnership. In most cases, this is not true. Generally, jointly owned rental properties are part of each owner’s individual property income, and reported as such as property income on their individual self assessment tax return using the Land and Property pages. This means each co-owner must consider their own share of gross rental income when determining whether they fall within the MTD for IT regime, and each co-owner must register for MTD for IT and maintain their own digital records.

When assessing whether MTD for IT applies, each owner must consider only their share of the gross rental income from jointly owned properties, together with any other qualifying income they receive, such as self employment income. However, in some cases joint owners are able to share the same software yet still make their individual submissions. Once within MTD for IT, each co-owner is responsible for maintaining digital records and submitting quarterly updates for their own share of the property income and expenses through compatible software.

The Practical Lesson is Simple

Agree from the outset:

• How income and expenses will be recorded,
• Ownership percentages,
• Maintain clear records.

Ensure each owner reports their correct share to HMRC so as to prevent errors, reduce administration and ensure compliance. Simple matters such as a separate joint bank account for the “rental” incoming s and outgoings, jointly accessible software. Profit share follows the legal ownership split. For married couples or civil partners, income is usually split 50/50 by default unless a valid Form 17 is filed to reflect unequal beneficial ownership.

Get In Touch

It’s the ideal time to seek advice and prepare for the new reporting requirements if you jointly own rental properties and are unsure how MTD for IT affects you. Partnerships will also need to use Making Tax Digital for Income Tax in the future. HMRC have stated that they will set out the timeline for this at a later date. Contact your local Whitings office for more information or advice on how we can help you.