When buying a property with another person, most landlords focus on mortgage rates, rental income and potential growth. However, one of the most important decisions is often overlooked: how the property is legally owned.
Whether you own as joint tenants or tenants in common can make a real difference to how rental income is taxed and how the property is passed on. It is an important decision for anyone thinking about long-term returns and wealth.
In the November 2025 Budget, the Chancellor announced that income tax on property income will rise by 2 percentage points from April 2027, to 22% for basic-rate, 42% for higher-rate and 47% for additional-rate taxpayers. This makes it more important than ever for landlords to review how their portfolio is structured.
Understanding the Difference
Joint tenants own the whole property together, with no separate shares. If one owner dies, their interest passes automatically to the surviving owner under the "right of survivorship", regardless of what their will says.
Tenants in common each own a defined share of the property. Shares can be equal (50:50) or unequal (for example 70:30 or 90:10). Unlike joint tenancy, each owner's share forms part of their estate and can be left to beneficiaries in their will.
For many landlords, particularly those building a portfolio, this extra flexibility can be relevant to both income tax and inheritance tax planning.
How to Switch
If you currently own a property as joint tenants, you can usually change to tenants in common at any time by:
- Serving a written notice of severance on the other owner(s)
- Applying to HM Land Registry to record the change
Severing a joint tenancy normally results in equal shares. If you want unequal shares, you will usually also need a declaration of trust setting out each owner's beneficial interest.
We recommend speaking to a solicitor, who can explain the legal implications and handle the paperwork for you.
Ownership Structure and Income Tax
Where a property is owned as tenants in common, rental income is generally taxed according to each owner's beneficial share. Where one owner pays tax at a lower rate than the other, this can affect the household's overall tax bill.
Married couples and civil partners are subject to specific HMRC rules. By default, income from jointly owned property is taxed 50:50. Where the couple own the property in unequal shares, they may be able to elect to be taxed on their actual shares by submitting Form 17 to HMRC, which must be done within 60 days of the declaration.
Ownership structure can also be relevant to landlords affected by Section 24. Mortgage interest can no longer be deducted from rental income; instead, relief is given as a basic-rate tax credit, which has increased tax bills for many higher-rate taxpayers.
Example (from April 2027 onwards)
Two people own a buy-to-let property as tenants in common. The property makes £12,000 a year in rental profit. One owner is a basic-rate taxpayer (22%) and the other is a higher-rate taxpayer (42%). For simplicity, this example assumes each owner's share is taxed entirely at their own rate and ignores personal allowances and other income.
80:20 split (80% to the basic-rate taxpayer):
- Basic-rate taxpayer: £9,600 income, £2,112 tax
- Higher-rate taxpayer: £2,400 income, £1,008 tax
- Combined tax: £3,120
50:50 split:
- Basic-rate taxpayer: £6,000 income, £1,320 tax
- Higher-rate taxpayer: £6,000 income, £2,520 tax
- Combined tax: £3,840
In this example, the combined tax bill is £720 a year lower under the 80:20 split. However, ownership shares must reflect genuine beneficial ownership, and you should always take professional tax advice before making any changes.
Capital Gains Tax
Ownership structure can also affect the Capital Gains Tax (CGT) payable when a property is sold. Each owner has their own £3,000 annual CGT exemption, and gains on residential property are currently taxed at 18% for basic-rate taxpayers and 24% for higher and additional-rate taxpayers.
For example, on a £40,000 gain, two owners can each use their £3,000 exemption, reducing the total taxable gain to £34,000, compared with £37,000 if the property were owned by one person.
Transfers between spouses and civil partners who live together are generally treated on a "no gain, no loss" basis, so ownership shares can often be changed without an immediate CGT charge. Any change should be considered carefully with a qualified tax adviser, alongside legal and mortgage advice.
Thinking Beyond Tax
Owning as tenants in common allows each owner to decide who inherits their share. This can be important for landlords who want to leave assets to children or plan for the longer term.
Joint tenancy may suit owners who want the property to pass automatically to the survivor, but it offers less flexibility for more complex family or financial arrangements.
Don't Overlook the Mortgage
Before making any changes to ownership, it is important to consider the mortgage.
Adding or removing an owner usually involves a transfer of equity, which your lender will need to approve. Depending on your circumstances, this could mean a new affordability assessment, legal work or a new mortgage product.
There may also be Stamp Duty Land Tax to pay where a share of the mortgage debt is taken on by another owner, so it is essential to get legal and tax advice before going ahead.
The Bottom Line
The way you own a buy-to-let property can have a lasting effect on your tax position, estate planning and future borrowing. What looks like a simple administrative detail could affect the profitability and flexibility of your investments for years to come.
If you own rental property jointly, it may be worth reviewing whether your current ownership structure still suits your goals. Before making any changes, always take professional legal and tax advice, and speak to us about any impact on your existing or future borrowing.
This article is for general information only and does not constitute tax or legal advice. We are not tax advisers, and you should seek independent professional advice on your own circumstances. The Financial Conduct Authority does not regulate tax advice, trust advice or will writing. Tax rules and allowances can change, and their effect depends on your individual circumstances.
Your home may be repossessed if you do not keep up repayments on your mortgage. Most buy-to-let mortgages are not regulated by the Financial Conduct Authority.
Next Steps
For more information or to speak with one of our specialist brokers, get in touch on 0345 345 6788 or submit an enquiry here.
