Co-Ownership Discount IHT UK: Tenancy in Common Share Value and HMRC IHTM09733 (2026)
HMRC accepts a 10-15% discount on a tenancy in common share for IHT — because a buyer of an undivided property share can't force a sale without a court order. On a £400k house held 50:50 with a co-owner, the correct IHT value is £180k-£170k, not £200k.
| Ownership Type | On Death | IHT Value | Discount | Notes |
|---|---|---|---|---|
| Joint tenancy (JT) — married couple | Deceased's share passes automatically to surviving spouse by right of survivorship — does NOT form part of the estate | NIL — not in the estate | Not applicable — share not in estate | The joint tenancy means the entire property is owned by the surviving spouse after the first death. The survivor's full property value enters their estate for IHT on second death. Couples concerned about second-death IHT sometimes sever the joint tenancy and convert to TIC to enable NRB trust / IPDI trust structures, though this is complex post-2007. |
| Joint tenancy (JT) — non-spouses (siblings, friends) | Deceased's share passes by survivorship to remaining co-owners — NOT through the estate | NIL — not in the estate (regardless of the property value) | Not applicable — share not in estate | The JT survivorship rule applies regardless of the relationship between co-owners. This can create unexpected outcomes: if two siblings own as JT and one dies, the other inherits the full property by survivorship, regardless of the deceased's will. To avoid this and allow the deceased's share to pass under the will, the JT must be severed and converted to TIC (a unilateral written notice to co-owner suffices — s196 Law of Property Act 1925). Severance before death = TIC; TIC = deceased's share in estate = valued with co-ownership discount. |
| Tenancy in common (TIC) — equal shares (50:50) | Deceased's 50% share passes under the will or intestacy — IS in the estate | 50% of full property value LESS the co-ownership discount (IHTM09733) | 10-15% discount on the arithmetic 50% value. E.g., £400k property; 50% arithmetic = £200k; 10% discount → £180k; 15% discount → £170k | Most common TIC structure. The discount is applied because a buyer of a 50% undivided share cannot force a sale without a court order (ToLATA 1996 s14 application); a limited market exists for undivided shares; a buyer would factor in the cost and delay of a potential court order. RICS surveyor must value the share and state the discount; HMRC District Valuer (DV) will review if the value is queried by HMRC. |
| Tenancy in common (TIC) — unequal shares (e.g., 75:25) | Deceased's specific % share (e.g., 75%) passes under the will or intestacy — IS in the estate | Deceased's % of full property value LESS the co-ownership discount | 10-15% discount on the arithmetic share value. E.g., £400k property; 75% arithmetic = £300k; 10% discount → £270k | Unequal TIC shares (specified in the title deed or a declaration of trust — TR1 or Form A restriction at Land Registry) allow different proportions. The discount still applies at around 10-15% regardless of the % held. The surveyor should specify the discount applied and the basis for it in the IHT valuation. |
| TIC with surviving spouse as co-owner (e.g., IPDI trust structure) | Deceased's share (held via an IPDI trust or directly by adult children) passes under trust/will. Surviving spouse has life interest in their own share. | Discounted TIC value for the deceased's share in the estate | 10-15% discount still applies — the relationship between co-owners (spouse or not) does not change the discount; what matters is that the share is an undivided TIC share with limited market | A common structure after the first death: first spouse's estate = 50% TIC (in IPDI trust for surviving spouse with remainder to children). Second spouse's own 50% TIC passes under their will. On second death, the IPDI trust 50% is in the estate (s49(1) IHTA — QIP = IPDI life tenant treated as owning trust assets). The executor values both shares (each at discounted TIC value) and aggregates for IHT. RNRB available if home passes to direct descendants from IPDI via s8H IHTA. |
| TIC with non-family co-owner (business partner, friend) | Deceased's share passes under will — IS in the estate | Discounted TIC value | 10-15% discount — potentially higher (up to 20%) if the co-owner relationship is particularly contentious or if there is evidence of a dispute that would make a forced sale more costly/time-consuming | A disputed or difficult co-ownership (e.g., business partners in a falling-out; family members in dispute) can justify a higher discount. A surveyor should address this in the valuation if applicable. HMRC IHTM09733 notes the discount is based on the open market reality that a purchaser of a partial share would demand a price reduction to reflect the difficulties of enforcing their rights. |
| TIC arrangement created artificially for IHT (e.g., parent gives 50% to adult child shortly before death) | Deceased's retained 50% TIC in estate — and the gift of the 50% to the child is a PET (s3A IHTA). If parent dies within 7yr: the PET is drawn back into estate at full value. The 50% TIC discount applies to the retained share. | Retained share: discounted TIC value. Gifted share (PET): if within 7yr, full value PET drawn back into estate — but the TIC discount would NOT apply to the PET value (the PET was at the full transfer value at the time) | Discount applies to RETAINED share only. HMRC may challenge the discount if the arrangement was purely to inflate the discount — e.g., 'deathbed' TIC transfers | Anti-avoidance: HMRC challenges sham arrangements. If a parent transfers 50% TIC to an adult child purely to manufacture a co-ownership discount on their retained 50%, HMRC may apply Ramsay/HMRC GAAR principles. The transfer must be a genuine beneficial transfer (the child must actually own and be entitled to their share). If genuine: the 7yr PET clock runs from the transfer date; if the parent survives 7yr, the gift falls out of the estate and only the 50% retained TIC (with discount) is in the estate. |
Co-ownership discount IHT UK 2026. HMRC reference: IHTM09733. Joint tenancy (JT): right of survivorship; deceased's share passes to surviving co-owner on death; NOT in estate; nil IHT value. Tenancy in common (TIC): distinct undivided shares; deceased's share passes under will/intestacy; IN estate; valued at discounted TIC share. Co-ownership discount: 10-15% typical; 20% possible for contentious co-ownerships; reflects limited market and ToLATA 1996 s14 court order requirement for forced sale. Valuation: RICS Red Book; HMRC District Valuer review if queried; cite IHTM09733 in supporting valuation. RNRB (s8D IHTA): available on discounted TIC share if qualifying residential interest passes to direct descendants. Spousal exemption (s18 IHTA): applies to full discounted TIC value. JT severance: s196 Law of Property Act 1925 — written notice to co-owner; no consent required; immediate effect; register Form A restriction at Land Registry. PET (s3A IHTA): transfer of TIC share in lifetime = PET; 7yr clock; within 7yr of death = drawn back into estate. Anti-avoidance: HMRC scrutinises deathbed TIC transfers. IPDI TIC structure: s49A IHTA IPDI; both TIC shares discounted on second death; RNRB via s8H IHTA. Land Registry: Form A restriction = TIC; no restriction = likely JT. IHT405 (land and buildings): disclose TIC share and discount on IHT400.
Co-Ownership Discount: Complete Guide
What is the co-ownership discount and why does HMRC accept it?
When property is owned as tenants in common (TIC), each owner holds a distinct undivided share of the property. On death, the deceased's TIC share must be valued for IHT — and the open market value of an undivided TIC share is LESS than its arithmetic proportion of the whole property's value. HMRC's own guidance (IHTM09733) confirms that a discount is appropriate in these circumstances. The reason: a hypothetical purchaser of a 50% undivided share in a property would not pay 50% of the full property value. Why? (1) The purchaser cannot sell the property without the co-owner's agreement (or without obtaining a court order under s14 Trusts of Land and Appointment of Trustees Act 1996 — ToLATA — which takes time and costs money); (2) the purchaser cannot use, occupy, or manage the property exclusively — the co-owner has equal rights to the property; (3) the market for undivided property shares is very limited — there are few willing buyers for partial interests in residential property; (4) the purchaser would face uncertainty about when and how they could realise their investment. Taking all these factors into account, a hypothetical purchaser would only buy a 50% TIC share at a discount to the arithmetic half-value. HMRC accepts this discount and the property is valued at the discounted amount for IHT. The typical HMRC-accepted discount range: 10-15% of the arithmetic share value.
Joint tenancy vs tenancy in common — the crucial distinction for IHT
The way property is co-owned determines whether the deceased's share is in their estate at all for IHT. Joint tenancy (JT): all co-owners together own the whole property; there are no distinct shares; on the death of one co-owner, the surviving co-owner(s) automatically inherit the deceased's interest by the right of survivorship (the 'jus accrescendi'). The deceased's interest does NOT pass under their will and is NOT in their estate for IHT. The full property then belongs to the survivors. Tenancy in common (TIC): each co-owner holds a distinct (and potentially unequal) undivided share; on the death of one co-owner, their share passes under their will or the intestacy rules; their share IS in their estate and must be valued for IHT. The choice of JT vs TIC therefore determines whether any co-ownership discount is relevant: JT = no share in estate = no discount question. TIC = share in estate = discount applies. How to check: look at the Land Registry title for the property. If there is a Form A restriction ('No disposition by a sole proprietor of the registered estate...') — the property is held as TIC. If no restriction — the property is likely held as JT. A Declaration of Trust (or TR1) may confirm the beneficial shares if the legal ownership is different from the beneficial ownership. Changing from JT to TIC: any one co-owner can sever a joint tenancy unilaterally by giving written notice to the other co-owner(s) (s196 Law of Property Act 1925). Severance converts the JT to a TIC of equal shares. It takes effect immediately. Registration of the Form A restriction at Land Registry is advisable to record the severance.
How the co-ownership discount is applied in practice
The executor must disclose all property interests in the estate on the IHT400. For a TIC property, the executor instructs a RICS-qualified surveyor to prepare a Red Book valuation of the deceased's TIC share. The surveyor should: (a) value the whole property at its open market value (ignoring the co-ownership); (b) calculate the arithmetic share (e.g., 50% of whole value); (c) apply a co-ownership discount to reflect the limited market for an undivided share and the difficulties faced by a purchaser — typically 10-15%; (d) confirm the discounted value as the IHT value of the deceased's TIC share. The IHT400 (and supplementary page IHT406 for bank accounts, or for property on IHT405) reports the discounted value. HMRC District Valuer (DV) review: if HMRC queries the property value (or the discount), the DV may carry out their own valuation. In most cases, where the discount is supported by a well-reasoned RICS valuation citing IHTM09733 and comparable factors, the DV will accept a discount in the 10-15% range. A higher discount (up to 20%) may be justified in cases of a particularly contentious co-ownership or difficult co-owner relationship — the surveyor must explain the basis. The IHT saving from the discount: at a 10% discount on a £200k arithmetic share: £20k reduction in chargeable estate; IHT saving = 40% × £20k = £8,000. At 15% discount: £30k reduction; IHT saving = £12,000. For higher value properties and larger shares, the savings are proportionally greater.
When TIC ownership arises naturally and when it is created by planning
Co-ownership discount planning arises both in natural co-ownership situations and as a deliberate planning structure: (1) Naturally arising TIC — siblings who inherit a parent's home equally as TIC; business partners who own commercial property as TIC; unmarried couples who own their home as TIC; adult children whose parent has given them a share of the family home decades earlier as part of an equity release or family arrangement. In all these cases, the TIC discount is straightforwardly available on the deceased's share — no planning concern. (2) Post-death IPDI structures — on the first spouse's death, the will creates an IPDI trust for the surviving spouse and the home is split into two TIC shares (50% in the IPDI trust; 50% in the surviving spouse's own name). On the second spouse's death: the whole property is in the estate (IPDI trust assets are in the life tenant's estate under s49(1) IHTA) but BOTH shares are valued as undivided TIC shares at a 10-15% discount. Planning uplift: the co-ownership discount reduces the IHT value of the property below its simple market value. (3) Deliberate planning transfers — a parent transferring a 50% TIC share to an adult child shortly before death is a PET (s3A IHTA). If the parent survives 7 years, the gift falls out of the estate entirely and only the retained 50% TIC (at a discounted value) remains in the estate. However: HMRC scrutinises arrangements that appear to be motivated purely by IHT avoidance; if there is no genuine reason for the transfer other than tax (e.g., the child does not actually benefit from or occupy the property), HMRC may challenge the arrangement as not being a genuine beneficial transfer.
Interaction with other IHT reliefs and the RNRB
The co-ownership discount does not interfere with other IHT reliefs: (a) RNRB (s8D IHTA): the RNRB is available on a TIC share in a qualifying residential interest (QRI) that passes to direct descendants. The RNRB offsets the (discounted) TIC share value — not the full market value. Example: £400k property; 50% TIC → £200k arithmetic → £180k discounted. RNRB: £175k. Net chargeable from property: £180k − £175k = £5k. The RNRB reduces the IHT liability on the discounted TIC value, not the full property. (b) Spousal exemption (s18 IHTA): if the TIC share passes to a surviving spouse (who is not the co-owner but who inherits the share under the will), the spousal exemption applies to the entire discounted TIC value. (c) APR/BPR: if the TIC property is agricultural land or qualifies for BPR, APR/BPR relief is applied to the TIC value (discounted) — not the full property value. This means the effective relief is on the (smaller) discounted value. (d) The RNRB and TIC: for IPDI trust TIC structures: the IPDI trust owns 50% TIC; the RNRB is available if the property passes to direct descendants on the IPDI life tenant's death (s8H IHTA). Both TIC shares are valued at a discounted amount for the second-death IHT calculation.
Frequently Asked Questions
What is the co-ownership discount for IHT on property?
The co-ownership discount is a reduction to the open market value of a deceased person's tenancy in common (TIC) share in a co-owned property, accepted by HMRC for IHT purposes under IHTM09733. The discount reflects the fact that a buyer of an undivided TIC share would pay less than the arithmetic proportion of the whole property's value — because they cannot sell, exclusively use, or manage the property without the co-owner's agreement (or a court order under s14 ToLATA 1996). HMRC typically accepts a 10-15% discount on the arithmetic share value. Example: house worth £400k; deceased owned 50% TIC; arithmetic value = £200k; co-ownership discount of 10% → IHT value = £180k; saving = 40% × £20k = £8,000. The discount must be supported by a RICS surveyor's valuation. A higher discount (up to 20%) may be justified in cases of a difficult co-owner relationship.
Does a joint tenancy avoid inheritance tax on property?
No — not in the simple sense. A joint tenancy (JT) means the deceased's share passes automatically to the surviving co-owner by right of survivorship on death, NOT through the estate. Because the share does not form part of the deceased's estate, it is not subject to IHT on the deceased's death. However: the surviving co-owner then owns the full property in their estate, which will be subject to IHT on their death. For married couples: JT to spouse → s18 IHTA unlimited spousal exemption on first death → full property in surviving spouse's estate on second death. The JT does not avoid IHT — it defers it to the surviving owner's estate. For non-spouses: JT means the surviving co-owner inherits the full property regardless of the deceased's will — the deceased cannot leave their share to anyone else. If the deceased wanted to leave their share to their children (not the co-owner), the JT must have been severed to TIC before death. Tenancy in common gives the deceased full control over who inherits their share.
How do I know if my property is joint tenancy or tenancy in common?
Check the Land Registry title for the property. If the title register includes a 'Form A restriction' ('No disposition by a sole proprietor of the registered estate (except a trust corporation) under which capital money arises is to be registered unless authorised by an order of the court.') — the property is held as tenants in common. If there is no Form A restriction, the property is likely held as joint tenancy. You can check free at land.gov.uk (HM Land Registry). If you are uncertain: a RICS surveyor, solicitor, or conveyancer can confirm the ownership type from the title documents. Note: the legal title (Land Registry) may show joint tenancy while a private Declaration of Trust or Deed of Trust documents a different beneficial split — the beneficial ownership is what matters for IHT. If in doubt, obtain the property's title register and any trust deeds.
Is the co-ownership discount available when property passes to a spouse?
Yes — the co-ownership discount is available on a TIC share regardless of who inherits it. If the deceased's TIC share passes to a surviving spouse: (1) the discount reduces the IHT value of the TIC share; (2) the spousal exemption (s18 IHTA) then applies to the full discounted value — meaning zero IHT on first death regardless. In this scenario, the co-ownership discount does not save IHT directly on first death (the spousal exemption covers it entirely) but may reduce the value recorded on the IHT400 for reporting purposes. The more significant application of the co-ownership discount is when the TIC share passes to non-exempt beneficiaries (children, friends, siblings) — where the discount directly reduces the chargeable value and saves real IHT.
Can I sever a joint tenancy to benefit from the co-ownership discount?
Yes — any co-owner can sever a joint tenancy unilaterally by giving written notice to the other co-owner(s) (s196 Law of Property Act 1925; the notice must be in writing and delivered to all other co-owners; no consent required). After severance, the property is held as tenants in common of equal shares. The Form A restriction should be registered at Land Registry to record the severance. After severance, your TIC share: (a) passes under your will (not by survivorship) — you can choose who inherits it; (b) is valued with the co-ownership discount for IHT on your death. However: do not sever a joint tenancy with a spouse purely for tax planning without taking legal advice — severance can have significant consequences for intestacy, property ownership on relationship breakdown, and the mortgage (lenders may need to be notified). Also: if the severance is made shortly before death with the purpose of obtaining the discount, HMRC may scrutinise the arrangement as tax-motivated.
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