Tax on partnerships

If your business is run as a partnership then you may or may not be aware that you are required to file a partnership self-assessment tax return each year.

If you are aware of this, then treat this as a reminder, but if you’re new to the world of partnerships, SimpleTax is here to explain how tax on partnerships work and how to prepare partnership accounts.

Registering a new partnership

For all you newcomers, the first step is setting up a business partnership and choosing a ‘nominated partner’ to register the partnership with HMRC. The chosen nominated partner is the main point of contact between your business and HMRC, and is responsible for completing your partnership tax return each year.

The nominated partner can be chosen by you, but if you fail to nominate a partner in time, HMRC will pick a partner for you . You can choose your nominated partner online, via HMRC’s website.  Also, each business partner must register themselves for self-assessment and National insurance contributions. Each partner will receive a UTR number which is needed to file a self-assessment.

Filing your individual tax return

So, despite filing a HMRC partnership tax return, each partner also needs to file an individual tax return. The format of your tax return depends on the status of your partnership e.g. a partner may be an individual (self-employed), or part of a company…

A self-employed partner

If you’re a self-employed partner aiming for a self-employed partnership, you must pay income tax on the share of your partnership profits. If you choose to file your tax return on paper, you will also need to complete either an SA104S form (if the partnership only received trading income and taxed income, such as interest from banks) or an SA104F form (if the partnership has a complex income structure).

A company partner

A partner is not always an individual; a partner can also be a company. Companies have to pay corporation tax on their partnership profits, which they must add to their self-assessment.

What do I need to do?

Now you have to file for self-assessment each year, it is essential that you keep accurate and up-to-date records. If you leave it too late, record-keeping can spiral out of control. Luckily, SimpleTax can tell you everything you need to know about record-keeping.

Finally, you must meet the specific deadlines set by HMRC. The self-assessment deadline for paper returns is 31st October each year. If you decide to file your partnership tax return online with SimpleTax, the deadline is 31st January. Please ensure you meet these deadlines, or HMRC will penalise you.

Hopefully this has cleared up any confusion you had regarding tax on partnerships.

View our Guide to Self Assessment Tax Returns

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.