Do you do business in partnership with one or more other people? This does involve some extra admin. But it isn’t as complicated as you might think.Here’s our handy guide to how business partnerships pay taxes to the HMRC.
If so, you need to register your business partnership with HMRC and file taxes separately. Even if you and your partners are already registered for self-assessment.
Registering your business partnership to pay taxes with HMRC involves three steps:
Like sole traders, business partnerships only pay taxes on their profits. In other words, you only pay tax on income after deducting expenses.As a rule of thumb, you can deduct any expenses as long as they’re business-related, including:
You must input any expenses in the business partnership’s profit and loss account. This document is the starting point for calculating the partnership’s taxable profits.
Partners cannot deduct business-related expenses on their personal tax return.So, if a partner pays for any business-related expenses out of their own pocket — business mileage, home office expenses or mobile phone costs, for instance — they must include them in the partnership’s profit and loss account.
Here’s how to file your business partnership taxes in the UK in five easy steps:
Each partner’s share of profits depends on what you’ve agreed when you started the partnership.You don’t have to have a written document to start a partnership. That said, it’s a good idea to put at least your profit-sharing agreement in writing. That way, you’ll have a written record of what you’ve agreed in case of a dispute.
Let’s say you’re in business with one other partner.Your partnership made £100,000 in profits in 2018/19 after deducting expenses. And you’ve agreed to split any profits down the middle.As a result, each of you gets £50,000.
You need to file a partnership tax return with HMRC at the end of each financial year. In the UK, the financial year starts on 5 April and ends on the 4 April.The deadlines are:
The partnership return should include: