Splitting rent and expenses for joint tenancy between non-married landlords?Make Text Bigger
I have a BTL mortgage property jointly with my brother (i.e. we are not married as I know the rules are different for married people). It’s a joint tenancy, not tenants-in-common.
We intend to split the rental income and expenses (via beneficial interests, and we will draw up an agreement to make this clear).
The split will be 80-20 so that he receives 80% of income (and I think would have to pay 80% of expenses?) and I receive 20% of income (and so pay 20% of expenses for tax purposes?). The differential split is based on the different contributions to the deposit we made. I have read this PIM http://www.hmrc.gov.uk/manuals/pimmanual/PIM1030.htm
I’m just confused about how we should do this 80-20 split of income/expenses in practice:
1. Does splitting the rent have to be done when the tenant pays us both? i.e must the tenant pay 20% of rent directly to me and 80% to my brother? Or is it okay for tenant to pay 100% to one of us so it’s easy, and then between ourselves we redistribute the money so it’s 80:20 overall?
2. I understand tax-deductible expenses need to be apportioned in the same proportion as income – correct?
3. Similarly, can one of us pay a repairman fully for repairs (assume it can be deducted against income tax as they’re not capital renovations) and then between ourselves one of us brothers will pay the brother who paid out back so it’s still a 80:20 split of expenses?
Or must one of us pay 80% to the repairman and the other brother 20% if we wish to claim the respective amounts against income tax on our returns?
Also, any suggestions about the best way to handle money going out and in with a joint tenancy like this would be welcome – would a joint bank account specifically for rental income/expenses be best (e.g. for future HMRC audit reasons) or would it be okay to have individual accounts for our respective property activities (I think I prefer that to minimise mingling our credit histories together)
We’re not a commercial partnership as we only have the one property and no immediate plans to get another. I would be extremely grateful for any advice.
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