Tax returns for partners and partnerships

What is a partnership tax return?

There are two returns that must be completed for partnerships:

Partnership tax return

A partnership must submit a partnership tax return to HMRC each tax year. The return shows the partnership’s income, expenses, profits (or losses) and how those profits or losses are allocated between the partners.

The partnership itself does not pay Income Tax. Instead, each partner is taxed on their share of the partnership’s taxable profits, whether or not those profits are withdrawn from the business.

The nominated partner is responsible for submitting the partnership tax return, although all partners remain jointly responsible for ensuring the information it contains is accurate.

Individual tax returns

Each partner is responsible for their own tax affairs.

If required to complete Self Assessment, each partner must submit an individual tax return, including the partnership pages, showing their share of the partnership’s income or losses. HMRC uses this information to calculate the Income Tax and National Insurance each partner owes.

What information is required on a partnership tax return?

The partnership tax return summarises the partnership’s financial information for the tax year. You’ll need to provide details such as:

• the partnership’s name and business activity
• the accounting period covered by the return
• the partnership’s income and allowable business expenses
• any capital allowances being claimed
• the partnership’s taxable profit or loss
• the names and details of each partner
• each partner’s share of the partnership’s profit or loss.

The nominated partner is responsible for submitting the partnership tax return to HMRC. Each partner then uses the information from the partnership return to complete the partnership pages of their own Self Assessment tax return, where required.

If your partnership has more complex tax affairs, such as capital allowances, mixed membership arrangements or other specialist tax issues, you may wish to seek advice from an accountant or tax adviser.

How do I complete the partnership pages of my Self Assessment tax return?

If you need to complete a Self Assessment tax return, you’ll also need to complete the partnership pages for each partnership you’re a member of.

The information you enter should be taken from the partnership tax return and will typically include:

• the partnership’s Unique Taxpayer Reference (UTR)
• the partnership’s business activity
• the partnership’s accounting period
• your share of the partnership’s profits or losses
• any adjustments that apply to your taxable profits.

HMRC uses this information, together with the rest of your Self Assessment tax return, to calculate the Income Tax and National Insurance you owe.

If you joined or left a partnership during the tax year, or if your circumstances are more complex, you may need to make additional adjustments. If you’re unsure what information to include, consider seeking advice from an accountant or tax adviser.

Making Tax Digital for Income Tax for partners

If you are a partner in a business partnership you are treated as self-employed for Income Tax purposes, but your partnership income is currently outside the scope of Making Tax Digital for Income Tax. You should therefore report your share of the partnership’s profits through Self Assessment where required. The government has said it intends to extend MTD for Income Tax to partnerships in the future, but no implementation date has yet been announced.

However, if you also have your own sole trader business or UK property income, those other income sources may bring you into the scope of MTD for Income Tax.

How do I calculate my share of profits?

The partnership will prepare its accounts to calculate its accounting profit.

Any tax adjustments are then made, such as:

• deducting allowable business expenses
• adding back expenses that are not allowable for tax purposes
• claiming any tax reliefs or capital allowances where appropriate.

Business expenses are generally allowable if they are incurred wholly and exclusively for the purposes of the business.

Once the partnership’s taxable profit has been calculated, it is allocated between the partners according to any partnership agreement. Partnerships can share profits equally, but partners can also agree different profit-sharing ratios.

Each partner is then taxed on their share of the partnership’s taxable profits, regardless of how much money they actually withdraw from the business.

How do I submit tax returns and what are the deadlines?

There are two tax returns that may need to be submitted each year: the partnership tax return and the individual partner’s Self Assessment tax return.

Partnership tax return:

The nominated partner is responsible for submitting the partnership tax return to HM Revenue & Customs (HMRC) on behalf of the partnership. The return reports the partnership’s income, expenses and taxable profits (or losses), together with each partner’s share.

The partnership tax return can be submitted:

• online by 31 January following the end of the tax year using compatible commercial software, or
• on paper by 31 October following the end of the tax year.

Individual partner’s Self Assessment tax return:

Each partner is responsible for submitting their own Self Assessment tax return, where required. This includes the partnership pages showing their share of the partnership’s profits or losses.

Individual Self Assessment tax returns must be submitted by:

• 31 January following the end of the tax year if filing online, or
• 31 October following the end of the tax year if filing a paper return.

Any Income Tax and National Insurance due is normally payable by 31 January following the end of the tax year.

Missing the filing or payment deadlines may result in penalties and interest.