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A property owned jointly or in partnership does not necessarily mean that the rental profit or loss must be allocated in the same proportion as the underlying ownership of the property. The owners can agree a different split as they see fit, the proportion referring to profits and losses only and not to the capital received should the property be sold.

It would be advisable for there to be an agreement quite separate from the property purchase deed that confirms the proportion.

The agreement could accommodate any change in the owners’ circumstances on an annual basis (for example) and thus ensure that the personal allowance and different tax rates are used to the best advantage each year.

Example:
The purchase deed of 54 Dorchester Place shows that the property ownership is split 90:10 between John and his partner, Jane. The net rental profit is £7,200 per year. John is a higher rate taxpayer whilst Jane is a student with no income other than her share of the profit.
John’s annual tax bill is £2,592 on his 90% share (£7,200 x 90% @ 40% = £2,592); Jane has no tax to pay on her 10% share (£7,200 x 10% = £720 – less than the personal allowance).

Joint net amount remaining after tax = £7,200 – £2,592 = £4,608.
It would be more beneficial for the 90:10 split to be in Jane’s favour as this would mean a tax bill for John of £288 and nil for Jane.

Joint net amount remaining after tax = £7,200 – £288 = £6,912.

There would be a tax saving of £2,304.