Partnership Tax Returns
Running a business as a partnership comes with various responsibilities, including the crucial task of submitting a partnership tax return to HMRC. A partnership tax return is essential for reporting the partnership's income, expenses, and profits, ensuring both partners comply with UK tax laws.
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But what exactly does the process involve? How much could you be expected to pay? And what resources should you use for accurate partnership tax returns?
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At Ultra Tax Ltd, we simplify the partnership tax return process, so you can focus on growing your business. Here's everything you need to know to ensure you file on time and correctly.
What is a Partnership Tax Return?
A partnership tax return is an annual submission to HMRC detailing the income and expenses of a business partnership. Unlike sole traders or limited companies, a partnership doesn’t pay tax itself. Instead, the profits are divided among the partners, who are then individually responsible for their own self-assessment tax returns.
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HMRC requires partnerships to submit their tax returns to report the overall business profits and losses. From this information, each partner’s share of the profits is calculated, and they report it individually on their personal tax returns.
Who Needs to File a Partnership Tax Return?
Any business partnership in the UK, whether it consists of individuals, limited companies, or other entities, must submit a partnership tax return. This includes:
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Traditional business partnerships between individuals.
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Limited liability partnerships (LLPs).
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Partnerships involving both individuals and companies.
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Every partner within the business is also required to file their own self-assessment tax return to report their individual share of the profits.
How Much Tax Will You Pay?
The amount of tax you pay will depend on your share of the profits within the partnership. Each partner is taxed individually based on their personal income tax rates, and they may also be liable for National Insurance Contributions (NICs). In some cases, partners may also need to pay Capital Gains Tax if the partnership involves selling assets or property.
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At Ultra Tax Ltd, our team of experts will help you navigate the complexities of partnership taxation, ensuring you claim any available tax reliefs and avoid overpaying.
How to File a Partnership Tax Return
Filing your partnership tax return involves the following steps:
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Register the Partnership with HMRC: Ensure your partnership is registered for Self Assessment.
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Prepare Financial Records: Collect all income, expenses, and profit information for the partnership over the tax year.
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Submit the Partnership Tax Return: File the partnership’s return online by 31st January following the end of the tax year.
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Partners File Individual Returns: Each partner must also submit their own self-assessment tax return, including their share of the partnership profits.
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It’s crucial to file on time, as missing the deadline can result in fines and penalties from HMRC.
Common Expenses You Can Claim as a Partnership
Knowing what expenses to claim can significantly reduce your tax liability. Here are some common expenses partnerships can deduct:
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Travel Costs: If you and your partners travel for business purposes, such as meetings or site visits, these costs can be claimed.
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Office Costs: Rent, utilities, and office supplies can be deducted as business expenses.
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Employee Wages: Salaries paid to employees are fully deductible from the partnership’s profits.
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Professional Fees: Fees paid to accountants, solicitors, and consultants related to the business are allowable expenses.
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Marketing and Advertising: The cost of promoting your partnership, whether through online ads, printed materials, or other methods, can be deducted.
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Claiming the correct expenses ensures you don’t pay more tax than necessary. At Ultra Tax Ltd, we specialise in helping partnerships maximise their tax savings.
Deadlines and Penalties for Partnership Tax Returns
The deadline for submitting your partnership tax return to HMRC is:
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31st October for paper returns.
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31st January for online returns.
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Failure to file your partnership tax return by the deadline can result in penalties, starting from £100 and increasing based on how late the submission is. Additionally, each partner’s individual self-assessment return must be submitted by 31st January, or they may face separate penalties.
Need Help with Your Partnership Tax Return?
At Ultra Tax Ltd, we take the stress out of filing your partnership tax return. Our team of experienced accountants will guide you through the process, ensuring every detail is accurate and submitted on time. Whether you're managing a small partnership or a complex LLP, we're here to help.
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Don’t leave your tax return to chance Contact us today for a free consultation and see how we can assist with your partnership tax returns.
See how Ultra Tax Ltd can help you with your Partnership Tax Returns
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