The short version: A Declaration of Trust (also called a Deed of Trust) is a legal document that shows how much each joint owner of a property actually owns. It’s commonly used by couples who rent out a property together.
Why would you need one?
HMRC assumes that couples own property 50/50. That means rental income gets split equally between you for tax purposes. But if you sign a Declaration of Trust, you can tell HMRC that you’ve agreed a different split.
How does this help with tax?
If one of you earns significantly more than the other, you’re in different tax bands. By shifting more of the rental income to the lower earner, you could reduce your overall tax bill as a couple.
For example, if one partner is a higher rate taxpayer and the other is basic rate, it makes sense to allocate more of the rental income to whoever pays less tax.
How do you set it up?
You’ll need a solicitor to draw up the Declaration of Trust. Once it’s signed, you submit Form 17 to HMRC to confirm the new ownership split. Without Form 17, HMRC will keep assuming 50/50.
Own a rental property with your partner and want to know if this could save you tax? Get in touch and we’ll run the numbers.
