Inheritance Tax on Jointly Owned Property UK: Joint Tenants vs Tenants in Common (2026)
Joint tenancy passes property by survivorship — the deceased's share is in the IHT estate but protected by the spousal exemption for married couples. Tenants in common gives each partner a share controlled by their will, enabling direct gifts to children (RNRB available) or IPDI trust planning to preserve the £350,000 combined RNRB on second death.
| Scenario | In IHT Estate? | Will Controls? | IHT on First Death | RNRB |
|---|---|---|---|---|
| Joint tenancy — first death, survivor is spouse/CP | 50% share in IHT estate (s5 IHTA) | NO — passes by survivorship | £0 (s18 IHTA spousal exemption) | RNRB claimed on survivor's death (full home value) |
| Joint tenancy — first death, survivor is not spouse (e.g. cohabitant, sibling) | 50% share in IHT estate (s5 IHTA) | NO — passes by survivorship | 40% on (50% value minus NRB) | No RNRB — share passes to non-direct-descendant by survivorship |
| Tenants in common — 50% share left to spouse in will | 50% share in estate | YES — controlled by will | £0 (s18 IHTA spousal exemption) | RNRB on second death (full home or survivor's share) |
| Tenants in common — 50% share left directly to children | 50% share in estate | YES — controlled by will | RNRB on 50% share (up to £175k); NRB on remaining taxable amount | RNRB available on 50% share — children inherit directly |
| Tenants in common — 50% share to IPDI trust (remainder to children) | 50% share in estate | YES — into IPDI trust for spouse | Spouse inherits IIP — s18 exempt on first death | RNRB preserved on IPDI termination (s8H IHTA) if remainder to direct descendants |
| Tenants in common — 50% share to discretionary trust | 50% share in estate | YES — into discretionary trust | IHT at 40% above NRB on 50% share (unless s18 exempt portion passes to spouse) | RNRB LOST on that 50% — discretionary trust breaks the RNRB |
Joint tenancy: right of survivorship — deceased's share passes outside the will. IHT estate: s5 IHTA 1984 (deceased's beneficial interest in jointly owned property). Spousal exemption: s18 IHTA 1984 — unlimited on transfer to spouse/CP. RNRB: s8D IHTA 1984 — £175,000 (frozen to 2030); requires qualifying residential interest to pass to direct descendant (s8K IHTA 1984). Tenants in common: share passes per will. Severing joint tenancy: s196 Law of Property Act 1925 — unilateral by either owner; register restriction at Land Registry (Form RX1). IPDI trust: s49A IHTA 1984 — property in life tenant's estate; RNRB preserved on IPDI termination (s8H IHTA 1984) if remainder to direct descendants. Discretionary trust: RNRB LOST. Cohabiting couples: no s18 exemption; 50% share fully taxable at 40% above NRB.
Jointly Owned Property and IHT: Complete Guide
Joint tenancy vs tenants in common — the key difference for IHT
Two people can own property together in England and Wales in one of two ways, and the choice has significant IHT consequences: (1) Joint tenancy: each co-owner holds the entire property jointly (not a distinct share). The critical feature is the right of survivorship (jus accrescendi) — on the death of one joint tenant, the other automatically inherits the whole property. The deceased's interest 'extinguishes' and the survivor holds the full property. The deceased's share cannot be left in a will — the will is irrelevant to jointly owned property held as joint tenants. For IHT purposes: despite passing automatically by survivorship (outside the estate for probate), the value of the deceased's beneficial interest IS included in their IHT estate under s5 IHTA 1984. For a married couple with a 50/50 jointly owned home worth £600,000: the deceased's 50% (£300,000) is in the IHT estate, but the spousal exemption (s18 IHTA 1984) means it passes tax-free. (2) Tenants in common: each co-owner holds a distinct share (commonly 50% each, but can be any proportion — e.g. 60%/40%). The share IS in the deceased's estate for probate AND for IHT. The share is controlled by the deceased's will — it can be left to the surviving spouse, to children, or to a trust. This flexibility is what makes tenants in common the preferred structure for IHT planning.
Severing a joint tenancy — converting to tenants in common
A joint tenancy can be converted to a tenancy in common (severed) at any time — by either owner, without the other owner's consent. The legal mechanism: serving a notice of severance (s196 Law of Property Act 1925). Once served: the property is immediately held as tenants in common (typically 50%/50%); the severance should be registered at the Land Registry by filing a Form RX1 (restriction on the register); the will should be updated to deal with the new tenants-in-common share. Why sever? Before April 2017 (when the RNRB was introduced), the standard married couple IHT strategy was: (1) sever the joint tenancy; (2) leave the first deceased's 50% share into an NRB discretionary trust (to use the NRB on first death instead of wasting it via the spousal exemption). This doubles the NRB use. However, since April 2017, this NRB trust approach loses the RNRB on the home — potentially costing more in lost RNRB than it saves in NRB use. Post-2017: the preferable planning is IPDI trust (s49A IHTA) for the 50% tenants-in-common share on first death — preserves both the RNRB and the transferred NRB. Or: sever and leave 50% directly to children on first death (uses NRB + RNRB on the first deceased's 50% share). Action point: ALL wills using pre-2017 NRB discretionary trust planning (including properties held as tenants in common, first deceased's share into a discretionary trust) should be reviewed. The RNRB loss on the trust-held property likely costs more than the NRB planning saves.
RNRB and jointly owned property — when it applies
The RNRB (s8D IHTA 1984) can apply to jointly owned property in different ways depending on the ownership structure: (1) Joint tenants — surviving spouse inherits everything: the RNRB is not claimed on the first death (no property passes to children on first death; the home passes by survivorship to the spouse). On the second death: the full 100% value of the home is in the survivor's estate — RNRB (£175,000) + transferred RNRB (£175,000 — using the first deceased's unused RNRB) = £350,000 of RNRB. The RNRB applies to the home on the survivor's death if it passes to direct descendants. (2) Tenants in common — 50% to children on first death: the first deceased's 50% share passes directly to the children. RNRB applies to the 50% share on first death (up to £175,000 — the RNRB is limited to the lower of £175,000 and the net value of the 50% qualifying residential interest). The survivor retains their own 50% share. On second death: RNRB (£175,000) + transferred RNRB (the first deceased's RNRB is partially used — only the unused portion transfers). The combined RNRB across both deaths in this structure is the same as joint tenancy through spouse — both use the total £350,000 (two people's RNRBs). (3) Tenants in common — 50% to IPDI trust: the 50% share enters the IPDI trust; RNRB preserved under s8H IHTA on the life tenant's (survivor's) death when the IPDI terminates and the share passes to children.
Cohabiting couples and jointly owned property — no spousal exemption
For cohabiting (unmarried) couples, jointly owned property creates a significant IHT trap: if the couple own the home as joint tenants and one partner dies, the deceased partner's 50% interest IS in the IHT estate — and there is NO spousal exemption (because they are not married). IHT on the 50% interest: 40% above the NRB. Example: home worth £600,000; 50% = £300,000; NRB £325,000. If the deceased partner has other estate (£200,000 savings), the NRB is used on those first: residual NRB for the home = £125,000; taxable value of home = £175,000; IHT = 40% × £175,000 = £70,000. The RNRB does not apply because the property passes by survivorship to the surviving cohabiting partner (who is not a direct descendant). Even if the cohabiting couple convert to tenants in common: the same result applies if the share is left to the surviving cohabiting partner in the will — the cohabiting partner is not a spouse and the full value is taxable. The RNRB does not apply to a surviving cohabiting partner — only to direct descendants. Solution: (1) marriage/civil partnership (triggering the spousal exemption); (2) life insurance in trust to pay the IHT; (3) leave the property share to children in the will (RNRB applies — children are direct descendants; survivor must accept losing the home to the children's joint ownership); (4) give the property share away (PET — 7yr clock) while retaining beneficial occupation (GWR warning — careful planning required).
Tenants in common — planning with IPDI trusts (the post-2017 approach)
Since the RNRB was introduced in April 2017, the preferred IHT planning structure for married couples who hold their home as tenants in common (or who sever the joint tenancy as part of planning) is the IPDI (Immediate Post-Death Interest) trust: (1) The first deceased spouse leaves their 50% share to a discretionary trust with an immediate life interest for the surviving spouse — this is an IPDI (s49A IHTA 1984); (2) On first death: the 50% share is treated as passing to the spouse (s18 IHTA — spousal exemption — no IHT; the NRB is not used); (3) The IPDI trust means the 50% share is in the surviving spouse's IHT estate for the duration of their life — the surviving spouse is taxed as if they own the 50% share; (4) On second death: the IPDI terminates; the 50% share passes to the children as remaindermen; RNRB preserved (s8H IHTA) — the RNRB applies to the 50% share on the second death; (5) Combined with the full home value in the survivor's own 50% share: the full property is effectively in the second estate with the benefit of NRB (£325,000) + transferred NRB (£325,000) + RNRB (£175,000) + transferred RNRB (£175,000) = £1,000,000 threshold. Benefit of IPDI over outright gift to spouse: the IPDI protects the surviving spouse's right to live in the home (life interest) while ensuring the children ultimately inherit; avoids family conflict if the survivor remarries. Benefit of IPDI over discretionary trust: RNRB is preserved (discretionary trust loses RNRB).
Frequently Asked Questions
Does jointly owned property go through probate and estate IHT?
For IHT purposes: yes — the deceased's beneficial interest in jointly owned property (whether joint tenancy or tenants in common) IS included in the IHT estate. For probate purposes: joint tenancy property passes by survivorship (outside the estate — no probate needed for the property itself); tenants in common shares DO pass through the estate (probate is needed to vest the share in the beneficiary). The IHT value is the market value of the deceased's share at the date of death (for a 50/50 joint tenancy: 50% of the property's full market value, though HMRC accepts a slight discount for an undivided share in practice on some property types).
How does the spousal exemption apply to jointly owned property?
Where a married couple or civil partners jointly own property (either as joint tenants or tenants in common and the share is left to the surviving spouse in the will): the spousal exemption (s18 IHTA 1984) applies to the deceased's share passing to the survivor — no IHT on first death. On second death: the full property (the original 50% inherited from the first spouse plus the survivor's own 50%) is in the survivor's estate. The spouse who survived can use the transferred NRB (IHT402) and transferred RNRB (IHT436) from the first spouse to claim up to £1 million of combined threshold on second death.
Should I change from joint tenants to tenants in common?
Post-2017, the answer is 'it depends' — but for most married couples with children, joint tenancy is usually fine because: (1) on first death, the home passes by survivorship to the spouse (spousal exemption — no IHT); (2) on second death, both transferred NRBs (£650k) and transferred RNRBs (£350k) = £1m combined threshold. Severing to tenants in common is still worthwhile where: (1) the surviving couple are unmarried (no spousal exemption — the share should pass directly to children with RNRB); (2) the estate will exceed £1m (consider IPDI trust to move part of the home into children's estate from first death to spread the estate); (3) there are specific family reasons (children from previous relationships, concern about remarriage). Sever + IPDI (not sever + discretionary NRB trust) to preserve the RNRB.
Does the RNRB apply to a tenants-in-common share left to children?
Yes — if the deceased's tenants-in-common share is left directly to a direct descendant (child, grandchild, stepchild, etc.) in the will, the RNRB (s8D IHTA 1984) applies to the value of that share. The RNRB is limited to the lower of £175,000 (2026/27) and the net value of the qualifying residential interest (the deceased's share of the home). Example: home worth £600,000; deceased's 50% = £300,000; RNRB = £175,000 (the maximum — limited to £175,000, not £300,000). NRB + RNRB threshold = £500,000. If the only asset in the estate is the 50% share (£300,000), IHT = £0 (well within the threshold). The first spouse's RNRB is used on the 50% share; the first spouse's RNRB is thus 'used' on first death — only the unused portion of RNRB transfers to the survivor.
What happens to jointly owned property if one owner dies without a will?
Joint tenancy: the property passes automatically by survivorship to the surviving co-owner regardless of intestacy rules — the will (or lack of one) is irrelevant. Tenants in common: the deceased's share passes under the intestacy rules (Administration of Estates Act 1925). For intestacy: (1) surviving spouse/CP: receives the statutory legacy (£322,000 in 2026) plus half the residue; the other half of the residue goes to children. (2) No spouse/CP: children inherit equally. (3) No spouse or children: parents, then siblings, etc. For unmarried cohabitants: they have NO automatic right to a tenants-in-common share under intestacy. If an unmarried partner dies intestate and their 50% tenants-in-common share passes to children (not to the surviving cohabitant), the surviving cohabitant continues to own 50% — but the children own the other 50%. This is why unmarried cohabitants need wills urgently.
Your Will Must Match How the Property Is Held
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