How The Way Landlords Own A Home Impacts Property Tax
According to new research, close to 4 million people who own buy to let property or their homes with someone else have little idea of their tax and legal obligations.
According to lender Ocean Finance, one in four of 17 million property owners are impacted by their legal status as joint tenants or tenants in common but do not understand the implications.
How a property is owned affects how buy to let property owners pay tax on rental profits and capital gains.
What happens to one owner’s share of a property when they die is also governed by how they own a property.
Generally, the form of ownership is decided when a home is bought, but the status can be changed by drawing up legal papers at any time.
Property law limits ownership to four people, and tax is split according to the share of ownership.
A joint tenancy gives each owner equal rights over the property and means each owner pays the same amount of tax. If a joint owner dies, their share is automatically split between the remaining owners.
A tenancy in common allows owners to have unequal shares in a property. If they die, property owned as a tenancy in common is not split among other owners but inherited by someone named in a will.
This allows landlords to change their shares in a property so higher rate taxpayers can offset some of the tax they pay to a basic rate taxpayer.
A spokesman for the firm Ian Williams said:
“The benefit of buying a house together as tenants in common is becoming better understood by homebuyers. With more couples getting financial support from families with their deposit, or putting in their own savings, splitting the ownership allows them to preserve their share. For older borrowers it offers some protection from care costs.
“The good news is that it isn’t too hard for joint tenants to change their tenancy if they need to – they can either download the DIY forms from HM Revenue and Customs or the Land Registry or get help from a solicitor or conveyancer.”
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