Whether jointly owned property attracts Inheritance Tax depends on how you hold it, who you co-own it with, and who it passes to on your death. The rules differ significantly between joint tenants and tenants in common, and the family home is treated differently from investment property. Here is the complete picture for 2026/27.
The Two Ways to Own Property Jointly
Understanding IHT on jointly owned property starts with knowing which ownership structure you have:
| Joint tenants | Tenants in common | |
|---|---|---|
| Share on death | Passes automatically to surviving co-owner (right of survivorship) | Passes according to your will or intestacy |
| Share size | Equal shares (e.g. 50/50) | Any split (50/50, 60/40, 70/30, etc.) |
| Can leave to anyone in will? | No — goes to co-owner automatically | Yes — your share goes wherever your will directs |
| IHT on your share? | Yes, unless passing to exempt beneficiary | Yes, unless passing to exempt beneficiary |
Most couples who buy a home together are joint tenants by default. To hold property as tenants in common, you need a specific deed of trust or a severance of joint tenancy.
The Family Home: IHT Rules
When the home passes to a spouse or civil partner
The spousal exemption means no IHT is due when property passes to a spouse or civil partner — regardless of the value and regardless of whether the couple are joint tenants or tenants in common.
Additionally, the Residence Nil Rate Band (RNRB) can be transferred between spouses if unused, allowing a surviving spouse to potentially shelter up to £500,000 of their estate (£325,000 NRB + £175,000 RNRB).
When the home passes directly to children
If you own the family home (or a share of it) and it passes to a direct descendant on your death, the Residence Nil Rate Band of £175,000 applies.
Combined with the standard nil-rate band of £325,000, you can pass £500,000 to your children before IHT applies. A couple with a home can potentially pass £1,000,000 free of IHT:
- Combined NRB: £650,000
- Combined RNRB: £350,000
- Total: £1,000,000
Worked Example: The Evans Family Home
David and Susan Evans own their home as joint tenants. It is worth £900,000.
David dies first, leaving his 50% share (£450,000) to Susan. No IHT — spousal exemption applies. Susan now owns 100% of a £900,000 home, with David’s NRB (£325,000) and RNRB (£175,000) transferable to her estate.
Susan later dies. Her estate includes:
- Family home: £900,000 (passing to their two children)
- Savings: £100,000
Total estate: £1,000,000
IHT calculation:
- Combined NRB: £325,000 × 2 = £650,000
- Combined RNRB: £175,000 × 2 = £350,000 (home passes to direct descendants)
- Total threshold: £1,000,000
- Estate value: £1,000,000
- IHT due: £0
Investment Property and Jointly Owned Buy-to-Let
Investment properties (second homes, buy-to-let) do not qualify for the RNRB. Your share is valued at market value (less joint ownership discount where applicable) and taxed at 40% above the nil-rate band.
The joint ownership discount
HMRC recognises that a 50% share in a property is worth less than 50% of the whole — because a buyer cannot compel the other co-owner to sell. HMRC typically applies a discount of 10–15% to part-shares.
Example: A buy-to-let worth £300,000, owned 50/50. Your share:
- Undiscounted value: £150,000
- Discount at 15%: −£22,500
- HMRC valuation: £127,500
The discount reduces the amount subject to IHT.
Changing from Joint Tenants to Tenants in Common
Couples sometimes convert from joint tenants to tenants in common so each partner can leave their share of the property differently — for example, into a trust for children from a previous relationship, rather than outright to the surviving spouse.
This can be done by a simple notice of severance (a letter to the co-owner, copy kept safely) and registering the change at HM Land Registry. No solicitor is required, though one is advisable for trust arrangements.
Warning: If you create a trust to hold your share at death, the trust is a separate legal entity. Getting the trust terms wrong can create unexpected IHT charges and cause long-running family disputes.
Tenants in Common: Unequal Shares for Tax Efficiency
Holding a property as tenants in common with unequal shares can be used to direct income and capital efficiently — for example, if one owner pays income tax at a higher rate, ownership can be skewed towards the lower-rate owner to reduce income tax on rental income.
However, HMRC requires that ownership shares reflect the genuine economic arrangement. Artificial arrangements entered into purely to reduce tax may be challenged.
See our residence nil rate band guide, gifting property to children IHT guide, and inheritance tax guide.