5 Key Considerations for Owning Your Buy-to-Let Property as Tenants in Common with Unequal Shares
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When purchasing a buy-to-let investment property, one of the most important decisions you’ll need to make is how to structure the ownership. If you’re buying with a partner, spouse, or family member, you generally have two choices: joint tenancy or tenants in common.
Under joint tenancy, both owners hold an equal interest in the property, and if one person dies, the other automatically inherits the whole property under the right of survivorship. In contrast, tenants in common allows owners to hold different proportions of the property (e.g., 70/30 or 80/20) and to pass on their share as they wish in their will.
For buy-to-let investors, the tenants in common structure with unequal shares can offer some financial, tax, and estate planning benefits. Here are five key considerations when choosing this approach:
1. Tax Efficiency – Allocating Rental Income to the Lower-Tax-Paying Owner
A major advantage of owning a buy-to-let property as tenants in common with unequal shares is the ability to allocate rental income in a tax-efficient manner. Since rental income is taxed as part of your personal income, the ability to distribute it based on ownership shares can result in significant tax savings.
If one owner is a higher-rate taxpayer (40% or 45%) and the other is a basic-rate taxpayer (20%) or has unused personal allowance, allocating a larger share to the lower-tax-paying owner can reduce the overall tax liability on rental income.
By using Form 17 and submitting a Declaration of Trust, you can formalise this split for HMRC, ensuring that rental income is taxed in the agreed proportions.
If both owners are joint tenants, rental income is automatically split 50/50, regardless of personal tax situations, potentially leading to an unnecessarily high tax bill.
2. Inheritance Planning and Control Over Your Share
For estate planning purposes, tenants in common provides more flexibility than joint tenancy. Under joint tenancy, if one owner dies, their share automatically passes to the surviving co-owner, even if their will states otherwise. This might not align with your inheritance wishes.
With tenants in common, you can:
Specify in your will who inherits your share of the property, whether it’s your children, other family members, or a trust.
Protect your investment for future generations by ensuring it is passed down according to your estate planning strategy.
If you’re in a second marriage or partnership, this structure allows you to leave your share to children from a previous relationship rather than automatically passing it to your spouse.
This level of control makes tenants in common a popular choice for those who want to preserve family wealth across generations.
3. Capital Gains Tax (CGT) Considerations When Selling
Capital Gains Tax (CGT) is an important factor when selling a buy-to-let property, and the structure of ownership affects how much tax is paid.
If you hold unequal shares, each co-owner is only taxed on their portion of the gain. This means that if one owner has unused CGT allowance (£3,000.00 for the 2024/25 tax year), they can utilise it effectively.
By holding the property as tenants in common, couples or business partners can structure ownership so that more of the gain falls on the owner with the lowest tax liability.
This can be particularly useful if one owner plans to sell their share gradually or transfer it before a sale to mitigate CGT.
4. Protecting Your Investment in the Event of Relationship Breakdown
Unlike joint tenancy, where both owners have equal rights regardless of contribution, tenants in common allows each party to own a specific percentage of the property. This can be useful in scenarios where one party has contributed more to the deposit or mortgage repayments.
If a relationship or business partnership breaks down:
Your share remains yours, and you can choose to sell, transfer, or leave it in your will as you wish.
There is less risk of one party claiming a 50% share by default, which can be particularly important if one person invested significantly more in the property.
A Declaration of Trust can further outline each party’s responsibilities, contributions, and how proceeds should be divided in the event of a sale or separation.
This structure ensures that investment contributions are fairly recognised and protected in the long term.
5. Flexibility in Transferring Ownership Shares Over Time
Owning a buy-to-let property as tenants in common provides more flexibility if you want to change ownership proportions in the future.
You can sell or transfer part of your share to another individual without needing the consent of the other co-owner (unless restricted by a legal agreement).
If your tax situation changes, you can adjust ownership percentages to make the rental income split more tax efficient.
With joint tenancy, transferring ownership can be more complex and often requires severing the joint tenancy first, which adds an extra legal step.
Final Thoughts
Choosing tenants in common with unequal shares for your buy-to-let property can provide tax benefits, greater control over inheritance planning, and better protection in case of relationship changes. However, it also comes with additional legal considerations, such as drafting a Declaration of Trust and ensuring wills are updated accordingly.
Before deciding, it’s crucial to seek professional tax, legal, and financial advice to ensure that the structure aligns with your investment goals and personal circumstances.
Would you like to explore how this structure could work for your investment strategy? Get in touch with or speak to a suitably qualified tax specialist to discuss your options based on your individual personal circumstances.