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How much income tax will I pay if I’m in a partnership?

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). 

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How much income tax will I pay as a partner?

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 (2020/21)
0% £0 to £12,500 (this is your personal allowance)
20% £12,500 to £50,000
40% £50,000 to £150,000
45% Over £150,000

How is my profit calculated?

A partners share of profit is calculated in the following way:

  • Calculate the partnership profit
    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.
  • Business expenses
    In order for expenses to be allowable for tax purposes they must be “wholly and exclusively” incurred for business purposes.
  • Non business expenses
    For tax purposes any expenses which are disallowed must be added back and this will increase the profit which is taxable.
  • Split the profit
    The profit is split between the partners in accordance with their agreement. This may simply be an equal share to each partner.

Use our interactive self employed tax calculator below to work out your income tax liability. 

Self employed tax and national insurance calculator

Use our handy calculator to find out how much tax will you will pay*

£

Please note that the results you see on your screen are estimates only. This is based on base rates and does not include things such as student loans. For full details of tax allowances, please see our article on 2020/21 tax rates.

Your take home pay and calculation

Please note that the results you see on your screen are estimates only. This is based on base rates and does not include things such as student loans. For full details of tax allowances, please see our article on 2020/21 tax rates.

When do I need to report my profit?

Partnership profits are reported to Her Majesty’s Revenue and Customs (HMRC) via self-assessment tax returns

When do I need to pay Income Tax?

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.

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