Income sharing trouble for separated couple

The facts of the case

At the end of May 2025 the First-tier Tribunal (FTT) published its decision in the case of Alison Moss v HMRC (2025) (A v HMRC). The case was brought by A following her appeal against HMRC’s decision on a number of issues regarding the taxation of rental income. The main dispute concerned who was liable to pay tax on the income. A argued her estranged husband ought to be taxed on half of it as the property was jointly owned. HMRC believed A alone was liable.

Parting of the ways

In 2015 A’s husband went abroad to work giving her authority (by a power of attorney) to make financial decisions in respect of the property. For whatever reason the couple permanently separated in 2016 but remained married. Because A’s husband made no financial provision for her she used the authority she had been given to generate income by letting it. A sold the property in July 2020.

Joint asset joint income

A’s main argument relied on the special rules that apply to joint income received for married couples. These say that irrespective of which spouse or civil partner is entitled to the income from a jointly owned asset, it will be taxed as if they were each entitled to half.

Declare different interests in property

Also, although a couple can declare and notify HMRC that they want to be taxed on income other than on a 50/50 basis, the declaration only allows attribution for income for tax purposes to be in proportion to their ownership share of the asset. For example, if a husband owns 75% of a property and his spouse 25%, they can jointly choose to notify HMRC that they wish to be taxed on income in those proportions. In this case such a declaration was not possible as A and her husband owned the property in equal shares.

FTT decision

In respect of A’s argument that her husband should be taxed on half the income, the decision for the FTT was simple to arrive at. While the judges expressed sympathy for the financial position A had been put in by her husband, the fact was that at the time the letting income started the couple were permanently separated and therefore, in accordance with tax rules, were not to be treated as married (or in a civil partnership) from the date of separation. The 50/50 rule ended on that date. Instead, the income was attributable however the joint owners decided and was taxed accordingly. Because A made the decision to let the property (the power of attorney gave her the authority) and received the income without any direction from her estranged husband, she was the sole recipient of the income and therefore taxable on all of it.

The point the FTT judges made regarding the allocation of income by joint owners who are neither married nor in a civil partnership is important. If you own property with someone but you’re not a married couple or civil partners, you can allocate the income between you in whatever proportion you like and you’ll be taxed accordingly.