Reporting income from a partnership involves a number of steps, including filing the partnership tax return, calculating the profits and ensuring the process is completed by the required deadline. Several factors will affect how you report your income, such as your percentage of income as agreed in the partnership agreement, the UK residency of the partners and where the partnership is managed and controlled.
How Are Partnerships Taxed?
Partnerships themselves are not subject to corporation tax. Instead, profits are shared between the partners, who individually declare their share of the profits through self-assessment. The profit-sharing percentage is set by agreement between the partners and they are taxed in a similar way to self-employed individuals.
How to Report Partnership Income in the UK
How you report partnership income depends on whether the partners are UK residents or not. If only some partners are UK resident and others are not, the process is different. It also depends on where the partnership is managed from. In all cases, you must complete and submit a SA800 Partnership Tax Return – there are two versions:
- SA104S – if the income is below £85,000.
- SA104F – if the income exceeds £85,000.
The SA800 form is used to declare the partnership’s finances and tell HMRC how the partnership has been accounted for. A nominated partner files the SA800, while all partners must sign an agreement which is submitted with their individual self-assessment returns.
UK Resident Partners in a Partnership
In this case, the return should include all profits made by the partnership within the UK. Profits taxed overseas must be shown separately.
Non-UK resident partners in a partnership
If all the partners are non-UK residents, the return should only include profits derived from UK activities.
When Only Some Partners Are UK Residents
If the partnership is managed and controlled in the UK, you will need to provide two statements:
- A statement of non-UK profits – UK resident partners declare their share in their individual tax returns.
- One return showing UK profits only – non-UK resident partners declare their share in their individual tax returns.
If the partnership is managed and controlled outside the UK, only the UK profits should be included in the partnership tax return. Non-UK residents will declare their share of UK profits in their individual tax returns, while UK residents must report their share of both UK and foreign profits.
Partnership Income and Self-Assessment
In a partnership, partners are responsible for paying income tax and National Insurance Contributions (NICs) on their share of profits from the partnership. Income tax rates are 20%, 40% and 45% depending on the level of income. Partners are treated as self-employed individuals and are therefore required to file a UK tax return.
To declare partnership income, you must register for self-assessment using form SA401. The deadlines for filing are
- Midnight, January 31 – for digital submissions.
- October 31 – for paper submissions.
Late filing of Self-Assessment results in penalties for each partner, and further delays can incur additional fines, which are imposed individually on the partners.
Rely on Professionals to Ensure Accurate Partnership Income Reporting
Reporting partnership income can seem complicated, and the regulations can be unclear. Without basic accounting knowledge, it’s easy to miss deadlines or incorrectly fill out tax returns, which can lead to fines. However, you don’t need to handle this process alone. You can seek help from a qualified accounting firm. We can take care of the formalities and help you report your income accurately. By choosing our firm, you place your accounting in reliable hands, saving you time, optimizing your taxes, and giving you peace of mind knowing your finances are managed by professionals.
