The decision most co-owners never knowingly made.
Here is something we see far more often than we would like. Two people buy an investment property together, the conveyancer asks how they wish to hold it, and somebody ticks a box on the transfer form without a second thought. Years later, that tick turns out to be one of the most important tax decisions they ever made.
Joint tenants or tenants in common. The phrases sound almost identical, and neither has anything to do with renting. Here, “tenant” simply means owner. The difference between the two, however, decides who inherits your share, how a sale is taxed, whether a married couple can split rental income unequally, and how much room you have for planning when the rules change.
They are changing. With higher tax rates on property income due from April 2027 and Making Tax Digital for Income Tax now in force for many landlords, the way you hold your property matters more this year than it has for a long time. This guide sets out the two forms of co-ownership plainly, walks through three worked examples, and answers the questions investors ask us most.
Joint tenancy: owning everything together.
Joint tenants (or joint owners) hold an equal, undivided share in the land. Put simply, each owner owns 100% of the interest, rather than a slice of it. Nobody can point to “their half”, because legally there are no halves.
That has three consequences investors need to understand.
- Survivorship. When a joint tenant dies, their interest in the land passes automatically to the surviving joint tenant or tenants. It cannot be passed by a will, so it cannot, for example, be left to the deceased owner’s children.
- Lifetime sale proceeds. On a sale during the owners’ lifetimes, the proceeds would normally be divided equally. Joint tenants can divide the proceeds according to what each actually contributed, provided they all agree and record that agreement in writing.
- Capital Gains Tax. For CGT purposes, each joint tenant is treated as entitled to an equal share of the sales proceeds, even where they did not all contribute equally to the cost of the land.
That last point is the one that catches people out. The owners may have a perfectly sensible private arrangement about who gets what, yet the tax position follows the equal shares that joint tenancy imposes.
Tenancy in common: owning your own share.
Where land is held by tenants in common (or owners in common), each owner holds a fractional share of the interest in the land absolutely, rather than jointly owning 100% of it. The shares need not be equal. Sixty and forty, ninety and ten, or any other split the owners agree is perfectly possible.
Because each share genuinely belongs to its owner, it can be sold or gifted as that owner sees fit. A tenant in common’s interest also does not pass automatically to the other co-owners on death; it passes under the owner’s will or the intestacy rules instead.
In our view, this is why tenancy in common is usually the better fit for tax planning. It gives you flexibility, and flexibility is precisely what you need when rates, reliefs and reporting rules move under your feet.
| Joint tenants | Tenants in common | |
|---|---|---|
| What each owner holds | An equal, undivided share; each owns 100% of the interest | A fractional share, held absolutely |
| Unequal shares possible | No | Yes |
| On death | Passes automatically to the surviving joint tenant(s) | Passes under the owner’s will |
| Selling or gifting your share alone | Not without first severing | Yes |
| CGT on a sale | Equal share of proceeds for each owner | Each owner’s own share |
| Suits tax planning | Rarely | Usually |
Severing a joint tenancy, and when it triggers CGT.
If you hold property as joint tenants today, you are not stuck. You can sever the joint tenancy, converting the ownership into a tenancy in common. Severance can be done with or without the agreement of all the joint owners, which surprises a good many people.
In England and Wales, the practical route set out by HM Land Registry is broadly this:
- Serve a written notice of severance on the other owners, or have all owners sign it if everyone agrees.
- Apply to HM Land Registry, usually on form SEV (or form RX1 where the SEV evidence cannot be provided), for a Form A restriction to be entered on the register.
- Where owners want unequal shares, record them in a declaration of trust, because severance on its own generally leaves the shares equal.
One insider point is worth stressing. The Form A restriction does not itself sever anything; it simply reflects on the register a change that must already have been made properly. We have seen families assume the Land Registry entry did the work, only to find otherwise when it mattered.
On the tax side, severance is not automatically a taxable event. There will only be CGT consequences if one or more of the joint owners reduces their interest. Keep the shares equal and there is usually no disposal; tilt them and the owner whose share shrinks has disposed of something.
That said, tax is not the only consideration. There may be other reasons, including non-tax ones such as the simplicity of automatic survivorship for a couple’s own home, that genuinely favour staying as joint tenants. The right answer depends on the people as much as the property.
Three worked examples.
The people and properties below are illustrative characters invented for this article. They are not clients, and all figures are for illustration only.
Example 1: severing into unequal shares.
Richard and Graham own Willow Court as joint tenants. The property is worth £1 million, so each has an effective interest of £500,000. As part of some wider tax planning, they decide to sever the joint tenancy and hold the property as tenants in common, 90 to 10 in Richard’s favour.
After the change, Graham’s interest has fallen from £500,000 to £100,000. He has made a disposal for CGT purposes, even though nobody sold anything to an outsider and, quite possibly, no money changed hands. Where an interest passes by way of gift or between connected people, the gain is generally worked out by reference to market value, so a paper transaction can still produce a real tax bill.
Example 2: a married couple and their rental income.
Helen and Mark are married, live together and own a buy-to-let flat as joint tenants. Helen pays tax at the higher rate; Mark is a basic rate taxpayer. By default, a married couple’s income from jointly held property is taxed 50:50, and while they remain beneficial joint tenants they cannot change that, because the election to be taxed on actual shares requires unequal beneficial interests.
They therefore sever the joint tenancy, sign a declaration of trust giving Mark the larger share, and then make a joint declaration to HMRC on Form 17. From then on, the rental income can be taxed according to their real shares.
Here is the uncomfortable part the online guides tend to skip. The split must be genuine. Mark’s larger share has to be his for capital as well as income, because the declaration only works where the interests in the income match the interests in the property. Two further checks are essential: whether the transfer between spouses falls within the no gain, no loss rule for CGT, and whether moving a share of a mortgaged property creates a Stamp Duty Land Tax charge.
Example 3: unequal contributions, equal tax.
Claire and her brother David bought a house as joint tenants. Claire put in three quarters of the purchase money and David one quarter. When they sell, they agree in writing to divide the proceeds 75:25, which joint tenants are entitled to do.
For CGT, however, each of them is treated as entitled to an equal share of the sales proceeds, regardless of the private arrangement. There is a second risk too. Had David died before the sale, his interest would have passed automatically to Claire, not to his own children under his will. Holding the property as tenants in common in the proportions they actually contributed, documented from the start, would have avoided both problems.
Why your ownership structure matters more in 2026 and 2027.
Three current developments have put co-ownership back at the top of landlords’ agendas, and they are driving much of what investors are searching for right now.
Higher tax on property income from April 2027. The Autumn Budget 2025 announced separate property income rates, each two percentage points above the current main rates, taking them to 22%, 42% and 47%. Relief for finance costs is due to move to the new basic property rate, and the order in which the personal allowance is set against different types of income is also changing. When each pound of rent costs more in tax, the gap between a higher rate spouse and a basic rate spouse becomes more valuable, and only owners with genuinely unequal shares can take advantage of it.
Form 17 for married couples and civil partners. Spouses and civil partners living together are taxed 50:50 on income from jointly held property unless they hold unequal beneficial interests and jointly declare them to HMRC. Beneficial joint tenants cannot use the election at all, which is exactly why severance often comes first. Unmarried co-owners, by contrast, are simply taxed on their actual shares.
Making Tax Digital for Income Tax. MTD for Income Tax applies to each owner individually, not to the property. HMRC’s guidance confirms that only your share of income from a jointly owned property counts towards your qualifying income. As the threshold falls in stages, the way a portfolio is split between co-owners can decide whether one, both or neither of them must keep digital records and send quarterly updates. HMRC has also introduced some easements for jointly owned property, which help with the quarterly detail but not with the threshold itself.
None of this means everyone should restructure. It does mean that a decision made casually at the point of purchase deserves a fresh, considered look.
Getting the paperwork right.
The law draws a firm line between the legal interest in land and the beneficial interest, and the two have different formalities.
In England and Wales, a contract for the disposal of a legal interest in land can only be made in writing, with two exceptions:
- where the disposal creates an interest that is a lease at full market rent for a term of less than three years; or
- where the contract is made in the course of a public auction.
In Scotland, the only exception is the grant of a lease for a term not exceeding 12 months.
A transfer of a beneficial interest, on the other hand, can still be made by oral contract. Our firm advice is not to rely on that. If HMRC, or indeed another co-owner, later questions who owned what and from when, an unwritten arrangement is very hard to defend. A properly drafted declaration of trust, signed and dated at the time, is a modest cost against a dispute that could be expensive.
A considered look, before the rules move again.
If there is one point we would gently insist on, it is this: decide how you hold your property deliberately, and put it in writing. Severance, a declaration of trust and a Form 17 election are each straightforward on their own. The value lies in getting them in the right order, with the CGT, Stamp Duty Land Tax and inheritance consequences checked before anything is signed.
Joint tenancy is not wrong, and tenancy in common is not automatically right. Each suits different people at different stages of life and investment.
If you would like us to review how your properties are held, or you are buying with someone and want to get it right from the outset, send us a message. We would be glad to talk it through.
Frequently asked questions.
How do I know whether we own as joint tenants or tenants in common?
For registered land in England and Wales, look at the proprietorship register of your title. A Form A restriction there generally indicates a tenancy in common. If there is no restriction, you are probably joint tenants, although the transfer deed and your conveyancing file are the reliable way to confirm it.
Can I sever a joint tenancy without my co-owner’s agreement?
Yes. One joint tenant can serve a written notice of severance on the others and then apply to HM Land Registry for a Form A restriction. Remember that the restriction records the severance; it does not create it, so the notice itself must be properly given.
Does changing from joint tenants to tenants in common trigger Capital Gains Tax?
Not by itself. A CGT disposal arises only where an owner’s interest is reduced, as in Example 1 above. Changing to equal shares as tenants in common usually leaves everyone’s interest where it was. Transfers between spouses or civil partners who live together are subject to their own rules and should be checked separately.
Can a married couple split rental income other than 50:50?
Only if they genuinely own the property in unequal shares as tenants in common and jointly submit Form 17 to HMRC. Beneficial joint tenants cannot make the election, and the shares of income must match the shares of the property itself.
How does joint ownership affect Making Tax Digital for Income Tax?
Each owner is looked at separately. Only your own share of the income from a jointly owned property counts towards your qualifying income, so two co-owners of the same portfolio can find themselves on different sides of the threshold.
Can we change our shares informally, without a written document?
A beneficial interest can be transferred by oral contract, but a contract to dispose of a legal interest in land generally has to be in writing. In practice, any change in shares should be recorded in a signed declaration of trust, both to satisfy HMRC and to protect each owner if the relationship changes.