If you are married or in a civil partnership, live together and let a property held in both your names, HMRC taxes the rent 50:50, whatever your actual shares. You can be taxed on your real shares instead only if you genuinely own the property in unequal shares and send HMRC Form 17 within 60 days. Unmarried co-owners are taxed on their own shares or an agreed split. With new property rates from April 2027, the split is worth checking now.
Married couples and civil partners: the 50:50 rule
Section 836 of the Income Tax Act 2007 says that where spouses or civil partners who live together receive income from property held in their joint names, each is treated as entitled to half. The deeds, mortgage and bank account do not change that.
- It only applies to property in joint names. If the flat is in one spouse's sole name, that spouse is normally taxed on all of the rent, and the 50:50 rule has no part to play.
- It only applies while you live together. For tax purposes, a couple stop living together when they separate under a court order or deed of separation, or when the separation is likely to be permanent. From then on, each is taxed on what they are actually entitled to.
- It only affects income tax. Capital gains tax on a sale follows your real beneficial shares, not the 50:50 rule.
Form 17: being taxed on your actual shares
Under section 837, a couple can jointly declare that they own the property, and the income from it, in unequal shares. The declaration only takes effect if HMRC receives notice on Form 17 within 60 days of the date it is made, with evidence of the unequal ownership, such as a declaration of trust or the transfer deed.
- The shares must be real. You cannot simply choose a split. Your share of the income has to match your share of the property itself, and HMRC can ask for proof.
- It does not work for joint tenants. Joint tenants own the whole property together, with no separate shares. You first need to sever the joint tenancy and become tenants in common, usually with a deed of trust recording the shares.
- It cannot be backdated. The declaration applies to income arising from its own date. A declaration signed in March does nothing for rent received the previous summer.
- It lasts until the shares change. If you later alter the ownership, the old declaration stops having effect and a new one is needed.
Moving a share to your spouse
To shift rent to a lower-earning spouse, the higher earner usually has to give away part of the property itself.
Capital gains tax. Transfers between spouses or civil partners who live together are treated as giving neither a gain nor a loss. The receiving spouse inherits the original cost, so tax is deferred to a sale, not cancelled.
Stamp duty land tax. A gift with no mortgage attached carries no SDLT. If there is a mortgage and the receiving spouse takes on a bigger share of it, HMRC treats that extra slice of debt as the price paid. Moving from 50% to 90% of a property with a £300,000 loan means taking on an extra 40%, or £120,000. That is below the current £125,000 nil rate band, so no SDLT would be due, although a return is still needed because the consideration is £40,000 or more. A larger loan could produce a bill. The 5% surcharge for additional properties does not apply to a transfer purely between spouses. Your lender must agree too.
The settlements rules. HMRC can tax income back on the giver if a gift between spouses is not outright. The gift must carry full rights to both the property and its income, with no strings, such as an understanding that the share will be handed back. The House of Lords decision in Jones v Garnett confirmed that a genuine outright gift of capital is protected. Keeping the capital while passing over only the right to rent is exactly what the rules catch.
So a transfer is a real gift: if the marriage ends, the share is your spouse's.
Unmarried co-owners
Friends, siblings and unmarried partners are not covered by the 50:50 rule. Each is normally taxed on their share of the property, but HMRC's guidance accepts that co-owners can agree a different split of profits or losses. HMRC looks at who actually receives and is entitled to the income, so put the agreement in writing and make sure the money really flows that way.
Between unmarried partners there is no no-gain, no-loss rule, so a gift is treated as made at market value for capital gains tax, and SDLT can apply to any mortgage taken over.
Why the split matters more from April 2027
From 6 April 2027, rental profits of taxpayers in England and Northern Ireland are taxed at the new property rates of 22%, 42% and 47% under Finance Act 2026. Scottish and Welsh taxpayers should check their own rates. Our guide to the April 2027 property income rates explains the change. A spouse with spare basic rate band pays 22%; a higher earner pays 42% or more. Two thresholds can push the effective rate higher still:
- £100,000: the £12,570 personal allowance falls by £1 for every £2 of adjusted net income above this, and is gone at £125,140.
- £60,000: the High Income Child Benefit Charge claws back 1% of Child Benefit for every £200 of income above this, and all of it by £80,000. The charge falls on the higher earner in the household.
Worked example
Tom earns £110,000 and Sara earns £20,000. They are married, live in England and own a mortgage-free flat as joint tenants. The rent is £24,000 a year and the profit after expenses is £20,000. The figures use the 2027/28 rates.
| Extra tax on the rent, 2027/28 | 50:50 (default) | 10:90 (with Form 17) |
|---|---|---|
| Tom's share of profit | £10,000 | £2,000 |
| Tom: tax at 42% | £4,200 | £840 |
| Tom: extra allowance lost, taxed at 40% | £5,000 lost = £2,000 | £1,000 lost = £400 |
| Sara's share of profit | £10,000 | £18,000 |
| Sara: tax at 22% | £2,200 | £3,960 |
| Total tax on the flat | £8,400 | £5,200 |
Tom's salary already cuts his allowance by £5,000, and each extra £2 of rent removes another £1, so his share costs him an effective 62%. Moving to 10:90 saves £3,200 a year. To do it, they sever the joint tenancy, Tom gives Sara an extra 40% by a deed of trust, and both sign Form 17 within 60 days. No capital gains tax or SDLT arises.
Two side effects. Sara's share of the gross rent becomes £21,600, so she would cross the £20,000 Making Tax Digital threshold and, on 2027/28 income, would need to join from 6 April 2029. And when they sell, 90% of the gain will be hers, using her own £3,000 annual exemption and any unused basic rate band. See selling a buy-to-let for how that gain is worked out.
Making Tax Digital for joint owners
Making Tax Digital tests each person's own share of gross rents plus any self-employed turnover. The thresholds are over £50,000 (2024/25 income, in MTD now), over £30,000 (2025/26 income, from April 2027) and over £20,000 (2026/27 income, from April 2028). Joint landlords record only their own share and can keep simpler records for jointly let property.
Separation and divorce
For disposals since 6 April 2023, separating spouses keep the no-gain, no-loss treatment for up to three full tax years after the year they stop living together, or until divorce if sooner. Transfers made under a formal divorce agreement or court order are covered without that time limit, and SDLT does not apply to transfers made under a divorce or separation agreement or order. Once separated, the 50:50 income rule stops and each is taxed on their real share of the rent.
What to do now
- Check your title at the Land Registry: are you joint tenants or tenants in common, and is there a deed of trust?
- Compare each owner's income against the £100,000, £60,000 and higher rate thresholds for 2027/28.
- If a transfer makes sense, check the mortgage, lender consent and SDLT before signing anything.
- Diary the 60-day Form 17 deadline from the date of the declaration.
- Check whether a new split brings either of you into MTD.
We help couples and co-owners with this through our property tax work for landlords. To review your own ownership with a Chartered Tax Advisor, book a consultation.
This article is general information about UK tax, based on the law and HMRC practice at the date shown above. It is not advice, and reading it does not make you our client. Tax rules change and their effect depends on your circumstances, so please speak to us before acting on it.