The choice between tenants in common and joint tenancy is one of the most consequential decisions co-owning landlords make — and one that can be changed after purchase. Understanding the difference, how to sever a joint tenancy, how to record unequal shares in a Declaration of Trust, how to protect those shares with a Form A restriction at the Land Registry, and the income tax and IHT consequences of each structure is essential for any landlord buying with a partner, spouse, or co-investor.
Joint Tenancy vs Tenants in Common — The Key Distinction
Two forms of legal co-ownership of land exist under English law: (a) Joint tenancy: all owners hold the entire property jointly — there are no separate shares; the defining feature is the right of survivorship (ius accrescendi): when one joint tenant dies, their interest automatically passes to the surviving joint tenants regardless of what the will or intestacy rules say; joint tenants cannot leave their share under a will; (b) Tenants in common: each owner holds a defined, separate share of the beneficial interest; shares can be equal (50:50) or unequal (e.g. 70:30); each tenant in common can leave their share under their will or it passes on intestacy; there is no right of survivorship — the deceased's share does not automatically pass to the co-owner; (c) Legal vs beneficial ownership: at law, up to four co-owners are registered as legal owners at HM Land Registry; the beneficial ownership (who actually gets the economic benefit) is a separate question; a Declaration of Trust records the beneficial shares regardless of the legal title; (d) Default position: when a property is purchased by two or more people and no express declaration of beneficial ownership is made, equity may presume a resulting trust based on contributions — but this is uncertain and contentious; always execute a Declaration of Trust at the time of purchase to record the agreed shares; (e) Land Registry registration: joint tenancy is the default registration form; tenants in common requires a Form A restriction on the register to prevent a sole surviving owner from overreaching the other's interest.
- Joint tenancy: right of survivorship — deceased's share passes automatically to the survivor regardless of the will; no separate shares
- Tenants in common: defined shares; no right of survivorship; each owner can leave their share under their will or to whoever they choose
- Default uncertainty: without a Declaration of Trust, beneficial shares on purchase are presumed from contributions — always record shares by deed at the time of purchase
- Form A restriction: required to protect a tenants in common arrangement at the Land Registry — prevents the register from being updated without a trustee's consent
- Income tax on rental income: split according to beneficial shares unless a Form 17 (HMRC) is submitted changing the split between spouses/civil partners
Severing a Joint Tenancy — How and Why
A joint tenancy can be severed at any time by one party unilaterally, converting it into a tenants in common holding: (a) Methods of severance under Williams v Hensman (1861): (i) unilateral written notice served on the other joint tenant(s) — the most common method; (ii) mutual agreement between all joint tenants; (iii) course of dealing — conduct over time inconsistent with continuation of the joint tenancy; (b) Formal severance: serve a written Notice of Severance on the other joint tenant(s); the notice does not require the other party's consent — it is unilateral; the notice takes effect immediately on service; (c) Land Registry: after severance, apply to enter a Form A restriction on the title to protect the severed tenants in common arrangement; without the restriction, the register does not reflect the change and a sole surviving legal owner could deal with the property as if it were subject to a surviving joint tenancy (overreaching the deceased's estate); (d) Why sever: (i) IHT planning — joint tenancy means the survivor inherits the full value; tenants in common allows each share to be left to children or a trust, preserving nil rate band planning; (ii) unequal contributions — partners who contributed different amounts want their respective shares recorded; (iii) relationship breakdown — severing immediately on breakdown protects each party's share from the other's creditors and prevents a surviving joint tenant from inheriting on death; (e) Death before severance: if a joint tenant dies before severance, the right of survivorship takes effect immediately — severance notices sent after death do not sever.
- Unilateral severance: one joint tenant can sever the joint tenancy by written notice served on the other — no consent required; the notice is effective immediately
- IHT planning: severing allows each share to pass to children or a discretionary trust rather than the surviving spouse — preserves both nil rate bands in the deceased's estate
- Land Registry Form A restriction: apply after severance to protect the new tenants in common arrangement and prevent overreaching by a sole surviving owner
- Act before death: severing after a joint tenant dies has no effect — the right of survivorship operates the moment of death, before any notice can be served
- Relationship breakdown: sever immediately on breakdown — without severance, the surviving party inherits the deceased's share regardless of any agreement or intended benefit
Unequal Shares, Declaration of Trust, and HMRC Form 17
Tenants in common can hold unequal shares — recording and maintaining those shares correctly is critical: (a) Declaration of Trust: a deed (not just a written agreement) recording the beneficial shares of each co-owner; should be executed at the time of purchase and updated whenever the shares change; covers: the percentage shares; how decisions about the property are made; what happens if one party wants to sell (buyout mechanism); what happens on death; how rental income is split; (b) Unequal shares — tax consequence: rental income is split according to beneficial shares; if A holds 70% and B holds 30%, A pays income tax on 70% of the net rental profit and B on 30%; HMRC's default assumption for spouses and civil partners is 50:50 regardless of underlying ownership — to change this, file Form 17 (Declaration of beneficial interests in joint property and income) with HMRC, accompanied by a Declaration of Trust evidencing the actual shares; (c) Form 17: Form 17 only applies to spouses and civil partners; it cannot be used by unmarried co-owners; once filed, the income split follows the Declaration of Trust; it can be revoked by a new Form 17; (d) Capital gains tax: CGT on disposal is also split according to beneficial shares; if A holds 70%, A pays CGT on 70% of the gain; the annual exempt amount (£3,000 from 2024-25) applies to each owner separately — two owners = two allowances; (e) Stamp duty: shares in a jointly owned property can be transferred between co-owners — but a transfer of a share is a land transaction for SDLT purposes; the consideration (if any) plus any mortgage debt assumed is subject to SDLT; specific advice should be taken on any rearrangement of existing ownership shares.
- Declaration of Trust: a deed recording the exact beneficial shares; execute at purchase and update whenever shares change — HMRC and courts rely on this document
- Form 17 (spouses/civil partners only): changes the income tax split from the default 50:50 to the actual Declaration of Trust shares; file with HMRC + copy of the Declaration
- Two CGT allowances: two tenants in common each have their own annual exempt amount — planning disposals to use both allowances can save significant tax
- Mortgage debt on share transfer: if one co-owner transfers their share to the other and the transferee assumes the mortgage liability, the assumed debt is chargeable consideration for SDLT
- Unmarried co-owners: Form 17 is not available; income is always split according to actual beneficial shares; a Declaration of Trust is essential to evidence the agreed split
IHT Planning, Form A Restriction, and Practical Checklist
Completing the tenants in common framework: (a) IHT and tenants in common: each owner's share forms part of their estate for IHT; on death, the deceased's share passes to whoever is named in the will (or on intestacy) — not automatically to the survivor; this allows: (i) leaving the share to children directly (using the deceased's nil rate band and residence nil rate band); (ii) leaving the share to a nil rate band discretionary trust; (iii) using IHT business or agricultural property relief where relevant; (b) Joint tenancy IHT risk: the full value of the property passes to the surviving joint tenant on death — potentially wasting the deceased's nil rate band and creating an IHT liability on the second death; (c) Form A restriction: apply to enter a Form A restriction on the Land Registry title after purchase as tenants in common or after severing a joint tenancy; the Form A restriction prevents registration of any disposition (transfer, mortgage, lease) of the registered estate unless a conveyancer certifies that the capital money requirement has been complied with; it prevents overreaching by a sole surviving owner; (d) Practical checklist for landlords buying as tenants in common: (i) agree the beneficial shares at the time of purchase; (ii) execute a Declaration of Trust at the time of purchase; (iii) apply to enter a Form A restriction at HM Land Registry; (iv) file Form 17 with HMRC if spouses/civil partners holding in unequal shares; (v) update wills to reflect the intended passing of the share on death; (vi) review life insurance to match the ownership structure.
- IHT efficiency: tenants in common enables the nil rate band to be used on the first death — joint tenancy wastes it; on a £600,000 property, this could save £130,000 IHT on the survivor's death
- Form A restriction: enter this at HM Land Registry after any tenants in common purchase or severance — it is the key protective measure for the arrangement
- Update wills: without a valid will, the deceased's share passes under intestacy rules — this may not reflect the intended beneficiary; always update wills when changing ownership structure
- Income tax filing: after filing Form 17, ensure each co-owner's self-assessment returns reflect the new split from the date the Form 17 takes effect
- Review on relationship change: review and update the arrangement on marriage, divorce, separation, new investment partner joining, or any partner exit
Frequently asked questions
Can I change from joint tenancy to tenants in common after buying a property?+
Yes — a joint tenancy can be severed at any time by one co-owner serving a written Notice of Severance on the other co-owner(s). The notice is unilateral — the other party's consent is not required. On severance, the ownership automatically becomes a tenants in common holding in equal shares (unless otherwise agreed). You should then execute a Declaration of Trust recording the agreed shares, and apply to register a Form A restriction at HM Land Registry to protect the arrangement. The entire process can be completed without selling the property.
Do tenants in common have to own equal shares?+
No. Tenants in common can hold any proportion of the beneficial interest — the shares do not have to be equal. Common arrangements include 70:30, 60:40, or any other ratio reflecting the parties' contributions, mortgage obligations, or tax planning objectives. The shares must be recorded in a Declaration of Trust to be legally certain. For spouses or civil partners, HMRC's default tax treatment is 50:50 regardless of the actual shares — file Form 17 with HMRC to apply the actual shares for income tax purposes.
What is a Form A restriction and why do I need one?+
A Form A restriction is an entry on the Land Registry title that prevents a sole surviving legal owner from dealing with the property (selling, mortgaging, or leasing) without a conveyancer certifying compliance with the overreaching requirements. Without a Form A restriction, a sole surviving owner could in theory sell the property and the purchaser would take free of the other owner's beneficial interest under the overreaching provisions of the Law of Property Act 1925. The restriction protects the tenants in common arrangement by ensuring the interests of all beneficial owners are taken into account on any disposal.
What are the inheritance tax advantages of tenants in common over joint tenancy for landlords?+
With joint tenancy, the surviving owner inherits the deceased's share automatically — potentially adding its full value to the survivor's estate and creating a larger IHT liability on the second death. With tenants in common, the deceased's share passes under their will. By leaving the share to children, a nil rate band discretionary trust, or other beneficiaries, the deceased can use their £325,000 nil rate band (and potentially the £175,000 residence nil rate band) on the first death rather than rolling the full value into the survivor's estate. On a £600,000 property jointly owned by a married couple, the difference can save up to £130,000+ IHT on the second death.