Jointly owned rental house - only one owner receiving rent

[saraclara]

My mum bought a new build about 12-13 years ago, to rent out. She paid the mortgage and received the rental income, but she registered my late husband and I as joint tenants with her. I've had nothing to do with the property and have never even seen it. The rent has always gone to my mum, and has gone towards her care fees for the last 10 years (the council pays the rest). She was perfectly fit when she bought it. She had the stroke that put her in nursing care about three years later.

I've never given the place a thought. But today it dawned on me that although I don't receive the rent, I could be liable for tax on 50% of it. Does anyone know if that's the case? And if so, how far back would I be liable?

It's a pretty terrifying thought, to be honest.

Presumably your mum is paying tax on the whole amount received? And that she has no/little other income so it makes sense. My neighbour takes the rent from her and her husbands flat as her income as she doesn’t work.

@superram

Presumably your mum is paying tax on the whole amount received? And that she has no/little other income so it makes sense. My neighbour takes the rent from her and her husbands flat as her income as she doesn’t work.

I hope that's the case. Surely I can't pay tax on money I don't see? But I read something today that indicated that for joint tenants, tax is due on a 50:50 basis, whichever partner (but it was talking about couples) receives the rent.

It didn't make sense to me, but it did send a chill through me.

www.taxinsider.co.uk/how-to-jointly-own-a-property-5050-but-split-rental-income-9010

I hate to be the bearer of bad news but if you own a share in the property then part of the rental income is your income to declare to HMRC. What percentage depends on what happened to your late husband's share. The fact it is paid into her account has no bearing on it, it's still your income and you can't pass it back to her on the basis that she pays less tax. Has she been submitting Self Assessments and working out allowances etc.? Why did she make you joint tenants? Do you own your own home? There will also be CGT when it's sold plus potentially implications for higher rate SDLT if you don't currently own but want to in the future.

The above article is 10 years old. HMRC has more info here:
www.gov.uk/guidance/income-tax-when-you-rent-out-a-property-case-studies#:~:text=The%20tax%20rules%20say%20that,and%20taxed%20on%20that%20basis.

When you complete the property pages of a tax form there is a box to park if you are claiming rental income is let jointly (box 3) so as long as that box is not marked on your mum's tax return you should be fine.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachmentdata/file/874009/SA1055EnglishForm.pdf

It's completely possible for rental income to be assessed as belonging to one party. Even if a married couple own a second property jointly the income generated can be assigned to only one person - obviously useful if one person doesn't work or is a lower tax payer than the other.

If the property is let via an agent in the UK they have to deduct tax before passing on the money unless there is non resident status in place - is it let privately or via an agents? Does your mum complete a tax return and is the box marked to say it's rented jointly?

Following because my family do weird stuff like this

@TheTeenageYears

When you complete the property pages of a tax form there is a box to park if you are claiming rental income is let jointly (box 3) so as long as that box is not marked on your mum's tax return you should be fine.

[[https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment]]data/file/874009/SA1055EnglishForm.pdf

It's completely possible for rental income to be assessed as belonging to one party. Even if a married couple own a second property jointly the income generated can be assigned to only one person - obviously useful if one person doesn't work or is a lower tax payer than the other.

If the property is let via an agent in the UK they have to deduct tax before passing on the money unless there is non resident status in place - is it let privately or via an agents? Does your mum complete a tax return and is the box marked to say it's rented jointly?

It's in the hands of an agent, which is one of the reason I've never needed to give the place a thought. I've seen none of the paperwork.

The whole thing is a mess. My mum said she was putting us as joint tenants so that we could take a share in the profits when she sold, and only later did we discover that our names were actually going on the mortgage. When my husband died, and my DM had gone into care, I insisted that I did not want to be legally responsible for the mortgage, even though my mum was paying it, so the mortgage was paid off with her savings. The house is now (still) worth less than she paid for it.

I don't know if she (or rather, the person who looks after her finances) completes a tax return. I need to find out about this.

Speak to a solicitor ASAP

@saraclara The rental agent may not be aware the property isn't owned solely by your DM. I only realised recently that my name was the only name listed as landlord on a property jointly owned by DH and I.

Not relevant now if the mortgage has been paid off but if the mortgage was taken out in DM, your late DH and your names you would have had to sign documents as a very minimum and presumably provide documents to be accessed for the mortgage. It's possible that in order to get the mortgage on the house being registered in joint names that the mortgage also had to be in joint names - there's another thread currently which says as much although in that case it was mortgage and deeds in husbands name only as wife is SAHM and I'm pretty sure that's just an excuse, find it hard to believe that you can't get a mortgage in joint names if only one person is working, it should just make a difference to how much you can borrow.

Speak to whoever deals with DM's tax return. Hopefully the joint income box isn't being ticked so the full rental income is being assessed as your DM's tax liability.

If the house is worth less than you paid for it then there will be no CGT plus when calculating CGT they take rental expenses into account. My daughter and I are joint tenants on a flat and I have always declared my half of the income on my tax return which makes it easy for my accountant to calculate my CGT. our flat is selling for £35k more than we bought it so by the time fees and expenses are taken off I don't think there will be any significant gain at all. So don't worry too much about the CGT unless prices soar

You need to establish exactly how the property is owned. Your mum can't have just put your name down as a joint owner and on the mortgage, there would have been loads of paperwork for you and your husband to sign and the conveyancer would have had to check your identity etc. If you do own a share then you'll need to speak to a tax specialist, not all the information given on this thread is correct.

Thanks everyone. I've just emailed the person who handles my mum's finance and asked for all the details. I've also checked on the house address and it looks as though in recent years, it has recovered its value and a bit more. Obviously at some point when it reverts to me there will be issues to deal with re: tax anyway. I'm just concerned that it will open up a can of worms about tax that might be due on the rental income.

This whole house business has been a nightmare, and we should never have agreed to be involved. But my mum is a difficult person and spun us a whole bunch of lies at a time when we were distracted by other life worries.

@TheTeenageYears: If the property is let via an agent in the UK they have to deduct tax before passing on the money unless there is non resident status in place - is it let privately or via an agents?

No, it’s the other way round!

We have just had this exact situation. My husband and I jointly own the property and I was submitting returns in my name only as I was not working so using my tax free allowance against the profit. We were recently contacted by HMRC and told that jointly owned property must have profit split 50/50 unless there is a prior agreement with the tax office of unequal split. We have just paid a tax bill going back to 2013 for my husband's 50% of the profit.

I’m not any kind of tax expert. But it seems from here that a Form 17 declaration can only be made by spouses or civil partners, and that everyone else is taxed on the income as per their beneficial interest.

www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem9800

So it could be used by @Narcos but not you OP.

You say you owned it with you late husband , so was it 33% each to you, him and your mother? You might find you own a much smaller share than you think so owe less tax.

Anyway you do need advice from an accountant, as it may be quite complicated.

If your mother has been declaring income that is yours as hers, that will affect the amount that the council will pay towards her care.

And you may be due to pay tax on the income, even though you have never seen it. Although your mother may have paid the tax herself, if she thought your income was hers.

You and your mother might be able to change the beneficial interest but there will be inheritance tax and other non tax implications.

So you definitely need professional advice, once you have all the facts and paperwork from your mothers accountant.

Do you have a POA for your mother and are you her executor ?

CORAL is mostly right here. Form 17 is required for married couples and ONLY where property is legally held jointly. If held by a single person on trust for spouse and self then Form 17 does not apply and an election in any proportion can be made.

For non-spouses the position for at least the last 25 years is that joint tenants can vary their percentage share of rental profits as they wish. If the mum has received the rent and used it that is a good indicator there is an agreement for her to receive and pay tax on that basis. Liek all things property related this should be set out in writing.

Thanks for your help everyone. The person who deals with my mum's financial stuff (and who got the form filled in when my husband died) has assured me that I'm not liable and it's dealt with in my Mum's self-assessment every year.

I hope she's right.

For joint owners who aren't married, the rental income can be taxed on whoever actually benefits from it. So in a mother/daughter joint ownership situation, if the mother keeps the money and declares it, that's perfectly fine and no impact on the daughter. Form 17 is only relevant for married couples, as is the general rule that rental income from a jointly owned property defaults to 50:50 for tax. The OP doesn't need to worry about it if she's not receiving the rental income - she doesn't have to declare something she doesn't receive.

How did your mum get a mortgage in all your names without your consent?

You must have supplied some paperwork and signed the forms to be included on any mortgage.

@levoyager67

How did your mum get a mortgage in all your names without your consent?

She did have our consent. But only at the last minute. She didn't tell us we'd be on the mortgage until everything was so far gone that we didn't feel able to withdraw from her plan. As I mentioned, we were under huge stress from elsewhere, and as my Mum is so difficult, we simply couldn't face the fallout.

Yes, it was very unwise, but her financial person reassured us that the mortgage wouldn't impact us in any way. And I'm not going to beat myself up about it because I know we were in a bad way at the time.

As soon as my husband died, and I realised that Mum had the capital to pay off the mortgage, I demanded that I was taken off it. As my mum's care costs began to eat away her capital, I could see that I was vulnerable in potentially being responsible for the mortgage.
So the balance was paid off and I've had nothing more to do with the place other than being named on the deeds.