12 things business partners should know about Self Assessment

There are many good reasons to go into business with others. People do it with partners, spouses, relations, colleagues and mates, it’s common, which is why there are 365,000 ordinary partnerships in the UK (about 7% of the total business population).

When you form an ordinary partnership, as with being a sole trader, you and the business are the same thing in law, so you’re personally liable for debts. But starting and running a business with others can provide many advantages, chiefly, you share the costs, risk, responsibilities and workload. They might have skills, knowledge, talents or qualities that you don’t have (and vice versa). The rewards must be shared, but being a business partner may give you a greater income.

Here’s 12 things business partners need to know

1. Each partner is personally responsible for paying tax on their share of the profits, as well as their National Insurance contributions.

2. Each partner must register for Self Assessment and complete an annual tax return to report their total income. Self Assessment is the system HM Revenue and Customs (HMRC) uses to collect Income Tax.

3. Ordinary partnerships must also register for Self Assessment. One “nominated partner” must do this (the partners must agree who this will be).

4. The partnership must keep accurate, up-to-date financial records showing all business income and costs (HMRC can ask to see this at any time). The nominated partner is responsible for this.

5. Your partnership must also register for VAT if its VAT taxable turnover is more than £90,000. You can choose to register if it’s below this, for example, if you want to reclaim VAT on business supplies.

Partner and partnership tax returns 

6. The nominated partner must also take responsibility for completing and filing a Self Assessment tax return each year on behalf of the partnership.

7. To report their own total taxable income, each partner must complete and file the main eight-page Self Assessment tax return (the SA100), as well as any supplementary pages that are required to report taxable income. For example, SA105 (rental income) or SA108 (capital gains), etc.

8. Partners must also submit supplementary page SA104 with their SA100 to report their business partnership income.

9 If you are part of more than one ordinary business partnership, an SA104 and Partnership Tax Return SA800 must be completed and filed for each.

10. The SA800 reports the partnership’s income and how it was distributed to the partners. The partnership itself isn’t taxed. The partners are, based on their share and how much other taxable income they report.

11. If the SA800 is not submitted before the deadline (31 January for online filing), each partner must pay an automatic £100 penalty, unless they have a justifiable reason (eg serious illness or bereavement). 

12. Via your tax return, HMRC allows you to claim back legitimate costs as “allowable expenses”, which can reduce your tax bill significantly.

If you’re a business partner, GoSimpleTax makes things much easier when completing your tax returns and supplementary pages. You’ll save lots of time when filling in your SA100, supplementary pages and SA800. Your SA104 will automatically be filled in and all forms will be filed online directly with HMRC as required. Start your FREE trial today and find why other business partners love GoSimpleTax so much.

Blog content is for information purposes and over time may become outdated, although we do strive to keep it current. It's written to help you understand your Tax's and is not to be relied upon as professional accounting, tax and legal advice due to differences in everyone's circumstances. For additional help please contact our support team or HMRC.