A partnership is a business which is owned and managed by more than one person. The partners are jointly responsible for all aspects of the business and will share the profits. Partners will pay income tax on their share of the profits (the rate and amount will be dependent on whether or not they have other sources of income).
Partners pay income tax on their taxable income (which includes their share of partnership profits), the current rates of income tax are:
|rate||Taxable income (2016/17)|
|20%||£0 to £32,000|
|40%||£32,000 to £150,000|
A partners share of profit is calculated in the following way:
In the partnership accounts, expenses are deducted from the income to arrive at the profit. It is advisable to use the services of an accountant for this.
In order for expenses to be allowable for tax purposes they must be “wholly and exclusively” incurred for business purposes.
For tax purposes any expenses which are disallowed must be added back and this will increase the profit which is taxable.
The profit is split between the partners in accordance with their agreement. This may simply be an equal share to each partner.
Calculate your income tax
This tool from HM Revenue and Customs (HMRC) will help you estimate your partnership national insurance and tax liabilities.
Partnership profits are reported to Her Majesty’s Revenue and Customs (HMRC) via self-assessment tax returns.
Income Tax and National Insurance contributions for partners are payable by 31 January following the tax year to which they relate.
If the amount exceeds £1,000, an individual is required to make a payment on account for the next tax year. Payments on account are due by 31 January and 31 July.
Partners are jointly responsible for all aspects of the business and will share the profits. Partners will usually pay national insurance contributions on their share of the profits.
Partnerships have a requirement to complete and submit a self-assessment tax return to HM Revenue and Customs (HMRC).Read more
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