I was playing Minecraft Pocket Edition with my sister a few days ago and we had problems where we couldn't join but then after a while we did but when we did I saw her custom skin as Steve and she saw the same thing with my custom skin.
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Both have it turned on

Does turning it off fix the issue?

Haven't tried it yet but will update you on it.

Just tried didn't work =(

Thank you for your report!
We're actually already tracking this issue at MCPE-78206, so I will resolve and link this ticket as a duplicate.
If you would like to add a vote and any extra information to the main ticket it would be appreciated.
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In Settings > Profile, do both of you have "Only Allow Trusted Skins" turned on?