Split Profits From Buy To LetWritten on July 12, 2018 by Kirk Rice LLP
The Question:
My wife and I own a buy to let property. Is it possible to split profits in a way other than 50/50?
Kirk Rice LLP answers:
There are two ways of treating the profits (or losses) from a jointly held property: a 50:50 split or by beneficial entitlement. The commentary below applies equally whether the profits and losses of the property business are calculated under the simplified cash basis or the accruals basis. Read more about these split profits methods.
Split profits 50:50
For married couples / civil partners living together this is the default method of splitting the profit and losses from a jointly held property. The income and expenses are simply split equally between the two parties regardless of their actual beneficial entitlement. This share of the income and expenses is reported on each person’s Tax Return.
Note that where the profit or loss from a jointly held property owned by a married couple / civil partners is split 50:50, it is not possible for the individuals to use different bases of assessment in the same tax year. If one individual elects for the accruals basis to apply, the other individual must also report the profit or loss from the property business on the same basis.
This automatic split does not apply where the married couple / civil partners are in partnership together and the jointly held property is part of the trading partnership. In this case, the agreed profit sharing ratio must be used to split the income.
Neither does the automatic split apply in relation to a furnished holiday letting business (either in the UK or overseas) run by the married couple / civil partners.
Beneficial entitlement
The second way to split profits and losses from a jointly held property is to split the income and expenses in accordance with the beneficial entitlement.
Where the profits and losses are split based on beneficial entitlement, the owners can opt for a different basis of assessment in the same tax year. Therefore, one individual can be assessed under the simplified cash basis, whereas another can be assessed under the accruals basis. However, this may be undesirable or impractical due to extra work that this will involve.
For joint holders of property, who are not married to each other, or in civil partnership with each other, this is the default way in which the property income is split (and no election needs to be made).
If spouses or civil partners do not want a 50:50 split of the joint income, the couple must make an election on ‘form 17’ for the income and expenses to be split according to each party’s beneficial entitlement (which normally corresponds to the underlying capital contributed by that party). Evidence of the beneficial ownership, such as written declaration, or deed, must be submitted to HMRC along with the signed form.
Form 17 must be signed by both parties and submitted to HMRC within 60 days of the date of the last signature. It will have effect from the day it was signed.
In the absence of a valid election, the income will automatically be split 50:50 as explained above.
For example, if the husband put in 60% of the capital to buy the property and the wife put in 40%, the couple could make an election for 60% of the interest to be assessed on the husband and 40% assessed on the wife. As the election must be aligned with the beneficial entitlement, it is not possible to choose to split profits purely based on the most tax efficient allocation (which may be 0% husband, 100% wife).
Any reader interested in looking at ways to split profits for your buy to ley you can call Viru Patel on 01344 875 000 in our Ascot office or Hadley Baldock on 0208 789 8588 in our Putney office or email info@kirkrice.co.uk.
Do you want to keep up to date with tax and financial planning issues?
Sign up to our fortnightly newsletter to receive similar articles on topics including personal tax, business accounting, investments, pensions and financial planning straight to your inbox.
DOWNLOAD OUR FACTSHEETS |
PROPERTY INVESTMENT TAX ASPECTS |
PROPERTY INVESTMENT BUY TO LET |
DOWNLOAD OUR KEY GUIDE |
TAXATION OF PROPERTY |
Please note: answers are given for general guidance only and specific advice should be taken before acting on any of the suggestions made. The information is based on current tax legislation which may change in future.
Recent Posts
-
Career Story – Rebecca EvansWritten on October 9, 2026 by Kirk Rice LLP
-
VAT Compliance: What Every SME Should KnowWritten on October 7, 2026 by Jonathan Swarbrick
-
6 Things to Know About Tax on Extra Income: Second Jobs, Freelance Work, & MoreWritten on October 5, 2026 by Jane Page
-
Business Valuation – Where Do I Start?Written on October 2, 2026 by Kirk Rice LLP
-
Payroll – Should You Outsource?Written on October 1, 2026 by Kirk Rice LLP
