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
 
Ian Piper
8th March 2021 Budget 2021: Super Capital Allowances

In what was seen my many as a Budget lacking in ideas to kick start the economy back into life, Rishi Sunak’s announcement of a notional 30% uplift to eligible capital allowances headlined as the proverbial ‘rabbit out of the hat’. The tweaked allowances will give businesses purchasing brand new plant and machinery more tax…

Read More »

Fiona Mann
4th March 2021 Budget 2021

  Following Chancellor Rishi Sunak’s delivery of the Budget yesterday, we have a brief summary and details of how it may affect you. Please click the link below:   Whiting & Partners Budget 2021

Read More »

Stephen Malkin
28th February 2021 1-Mar-21: Are you ready for new VAT Domestic Reverse Charge rules for construction services?

VAT registered businesses working within the construction sector should be aware that new domestic reverse charge VAT administration rules are being introduced wef 1 March 2021 (delayed from original October 2019 launch date). The Government announced in the 2018 Budget that they are trying to reduce missing trader fraud; where builders collect VAT from their…

Read More »

Ruth Pearson
25th February 2021 HMRC Advisory Fuel Rates

HMRC have issued the new advisory fuel rates (AFR) which come into effect from 1st March 2021.   They have increased by 1p per mile for petrol and diesel vehicles with engines of 1400-2000cc reflecting a small increase in fuel prices over the last quarter.   The advisory electricity rate for fully electric cars remains…

Read More »

Keith Day
19th February 2021 VAT deferral new payment scheme – join from 23 February

If you deferred paying VAT due in the period from 20‌‌ March to 30‌‌ June‌‌ 2020, you should pay it by 31‌‌ ‌March‌‌ ‌2021 if you can.   If you can’t afford to pay by 31‌‌ March‌‌ 2021, you can join the VAT deferral new payment scheme and pay your deferred VAT over a longer period.   The online service…

Read More »

Scott Butcher
19th February 2021 Deadline looms for CBILS & BBL schemes

We are now just over a month away from the 31st March 2021 deadline for applications for the Bounce Back Loan (BBL) and Coronavirus Business Interruption Loan Scheme (CBILS).   The schemes were introduced to provide businesses with much needed working capital during the global pandemic, businesses benefited from no capital repayments being required for…

Read More »