Property allowance considerations: Joint properties held in unequal proportions

20th May 2019

The property allowance was introduced on 5 April 2017, allowing a flat rate deduction of £1,000 to be claimed against property income, in lieu of keeping detailed records of expenses.

This however, raises the question as to whether individuals renting out a joint property are required to make the same claim as one another. In short the answer is no. The claims are not dependent on one another and in some circumstances it can be beneficial to make opposing claims, as detailed below.

Joint ownership of rental properties

It may be beneficial in some circumstances for one person to claim expenses as usual and the other to claim the property allowance, particularly if a property is held in unequal proportion.

Example: Peter and Tom

Peter and his son Tom own and rent out a property, which was purchased a number of years ago. Peter owns 90% of the property with Tom owning the remaining 10%. The property income, taking into account the most beneficial elections available, would be:

  Total (100%) Peter (90%) Tom (10%)
Income 15,000 13,500 1,500
Actual expenses (5,000) (4,500) (500)
Property allowance   (1,000) (1,000)
       
Taxable property income 10,000 9,000 500

 

In this case, Tom is better off claiming the property allowance as his proportion of expenses is below £1,000. However, Peter clearly should not make the claim and instead should deduct actual expenses in the usual way (as these are well above £1,000).

It is therefore worth considering the percentage ownership of your rental property, ensuring that the most beneficial claim is made for each individual year on year, rather than for the property as a whole.

Other considerations

Depending on your circumstances, there may be further considerations. For example, if you jointly own property with your spouse and want to change the split of income to reflect the beneficial ownership, a form 17 would be required by HMRC.

In such cases there are other tax factors to consider including the implication for capital gains tax in the future, as well as non-tax factors such as wills and any mortgage on the property. It is therefore recommended to always get both legal and financial advice before proceeding with any transfer of beneficial ownership.

For more information on the property allowance and how it may benefit you, contact us here:

https://www.whitingandpartners.co.uk/about-us/contact-us/ 



 
Other items in Blogs
 
Ruth Pearson
17th October 2019 Is it too early to talk about Christmas!

In December 2018 HMRC wrote to employers to advise of a temporary easement on reporting PAYE information in real time. This was for a number of reasons, one of which could be due to businesses closing over the Christmas period and therefore having to pay staff earlier than normal.   HMRC have received feedback from…

Read More »

Chris Kelly
8th October 2019 Whiting & Partners advises Lettings Agency on finding its new Home

Whiting & Partners, The Corporate Finance Network’s representative firm in Suffolk has advised a well-established lettings agent on its sale to a national group.   The Whiting & Partners Corporate Finance team were approached by their client when they decided to explore opportunities to sell their agency. The team, led by Corporate Finance Partner, Chris…

Read More »

Matilda Mawson
2nd October 2019 Class 2 National Insurance – HMRC’s ongoing issues

July 2015 saw the end of direct debit collection for Class 2 National Insurance. Contributions are now collected through self-assessment and, despite there being 4 years since the change in the way payments are made, HMRC are still having teething problems. The issues arise as HMRC are running two computer systems side by side: national…

Read More »

Ian Piper
1st October 2019 New Off-Payroll Working Tax Rules: Y/N?

Readers, particularly knowledge based contractors working through their own personal service companies, will hopefully now be familiar with the new ‘off-payroll working’ tax rules being introduced in the private sector on 1 April 2020. These are being introduced as part of the Government’s general strategy over recent years to eliminate tax avoidance, tax evasion, and…

Read More »

Richard Alecock
12th September 2019 “Get ready for Brexit” workshops

  The Department for International Trade is hosting “Get ready for Brexit” workshops across the East region, each running from 11:30 – 13:30 followed by a networking lunch.   Please see the link below for dates and venues.   http://x.email.ukti.gov.uk/ats/msg.aspx?sg1=6a523609b267f7129747b384f8f21e3e

Read More »

Steven Denton
10th September 2019 Employer allowance – is it worth the hassle?

The £3000.00 employer allowance ceases at the end of the current tax year. From April 2020 employers will have to re-apply for a di minimis state aid based allowance.   A new HMRC checklist will have to completed to declare the following;   NIC contributions in the previous tax year were beneath £100,000; Confirmation that…

Read More »