Set up and register a partnership

Tax matters of a partnership

Income Tax and Capital Gains Tax

The profits and gains of the partnership are shared among the partners. Each is personally responsible for paying tax on their share.

The nominated partner must register the partnership for business taxes with HM Revenue & Customs (HMRC). They can do this online.

Each partner must also register themselves for Self Assessment and National Insurance. The partnership and each partner will each then receive their own Unique Taxpayer Reference for Self Assessment. HMRC will then set up the right tax and National Insurance records for both the partnership and partners.

Register online for Self Assessment and National Insurance Contributions on the HMRC website

Find out more about how to register partnerships and partners in our guide on registering for Self Assessment.

Every year each individual partner will need to complete a Self Assessment tax return to show the profits they get from the partnership.

The partnership should appoint one of its officers - the nominated partner - to fill in the Self Assessment Partnership Tax Return and send it to HMRC. This includes a Partnership Statement, which shows how profits or losses have been divided among the partners. The nominated partner should also ensure that all other officers are given copies of the Partnership Statement to help them complete their own tax returns. Although the nominated officer has responsibility for the Partnership Tax Return, all the partners are jointly liable for any penalties resulting from it being submitted late or incorrectly.

One of the easiest ways to send a tax return is online. See our guide on completing your tax return (partners and partnerships).

National Insurance contributions

As well as being responsible for their tax, individual partners are also responsible for paying their own National Insurance contributions (NICs). Partners normally have to pay Class 2 National Insurance contributions. If their annual profits are over a certain amount they also pay Class 4 contributions. For more information, see our guide on self-employed tax and National Insurance.

Corporation Tax

If partners are companies, they must pay Corporation Tax on their profits from the partnership, and should record the relevant figures on their Corporation Tax return. For more see our guide introduction to Corporation Tax.

VAT

If the partnership has - or expects to have - turnover of more than £73,000, it will need to charge VAT to its customers and pass this on to HMRC. Use our interactive tool to find out if you need to register for VAT.

PAYE (Pay As You Earn) for employers

Partnerships with employees will need to collect and pay income tax and NICs, which will mean operating a PAYE (Pay As You Earn) system. See our guide on PAYE for employers: the basics.

Construction Industry Scheme

If the partnership is a contractor and/or a sub-contractor in the construction industry, you must also register with the Construction Industry Scheme.

For more information, see our guide: what is the Construction Industry Scheme?

Subjects covered in this guide


HMRC Newly Self-Employed Helpline

0845 915 4515

HMRC New Employer Helpline

0845 60 70 143

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