A Declaration of Trust is a document that shows how much each of the joint owners of a property actually own. It’s also called a Deed of Trust. The most common situation for using one is if you’re in a couple (married or civil partnership) and you rent out a property that you own together.
Usually, HMRC will assume that a couple owns equal portions of a property i.e. 50–50. Both will need to file a Self Assessment and pay tax on their share. But if you sign a Deed of Trust, you can tell HMRC that what you earned from renting out your jointly owned property isn’t split equally.
Using a Deed of Trust can help you (as a couple) pay less tax if one of you earns significantly more than the other. Have a look at this real-life example to put it into practice:
Declarations of Trust aren’t just for couples putting money into a property equally – they can also be used if you buy property with friends as well. And, the split doesn’t need to be 50-50. You can use them for whatever split you prefer e.g. 70% – 20% – 10% between three people.
We can help you and your partner or companions work out if a Declaration of Trust would benefit your situation and help your earnings to be more tax-efficient. Get in touch with our team today for bespoke advice at a consultation!