Why are jointly owned properties split 99:1?

Why are jointly owned properties split 99:1?

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When a married couple jointly own a BTL property and one spouse pays tax at higher rates then the other it is common to create a deed of trust declaring that the beneficial interest is split 99:1 in favour of the lower earning spouse.

Is there a legal reason why 100% of the beneficial interest cannot (or should not) be assigned to the lower earning spouse?

This would avoid the need to calculate the split and the higher earning spouse may not need to complete self assessment.

Replies (4)

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By Mr_awol
07th Mar 2023 13:05

It depends on the reasons for (and possibly methods of) transfer as well as the starting position.

If the property is already owned by the higher earning spouse (and ignoring inheritance or inter-spousal transfers, it has to be said that higher earning spouses often end up with surplus property or assets whereas lower earning spouses often do not) then it 'may' be worth passing 1% beneficial interest to the lower earning spouse to trigger the automatic 50/50 rule. It 'may' even be beneficial to transfer the majority (your 99%) and take steps to have the property taxed accordingly.

Alternatively, when buying a property, it 'may' be worth just buying it in the name of the lower earning spouse in the first place.

Of course there may be other (non tax) reasons why the higher earning spouse might want to retain a nominal interest in the property - for example, if the jus arranged for a new BTL to be bought in the name of their lower earning spouse, they may be blissfully unaware of any future mortgage (or even sale) of that property.

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By Paula@Butt
07th Mar 2023 16:49

It may be a mortgage thing. Lenders don't like letting the higher earning spouse off the hook but seem happy to work with a low percentage interest

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By Justin Bryant
07th Mar 2023 16:59

I'm 99% sure it's coz 99% of people don't know what they're doing (and just slavishly follow what's on the internet, which is 99% wrong).

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By More unearned luck
07th Mar 2023 17:48

"This would avoid the need to calculate the split and the higher earning spouse may not need to complete self assessment."

If the rental income was the only reason the higher earning spouse was in SA then the gross rents must exceed £100K. That is to say, 1% of £100K or a lesser sum minus the PIA equals nil. Nil income from property = no need to be in SA.

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