Many entrepreneurs choose to start a business with others instead of going it alone. Whether it’s with a friend, a family member, a former colleague, or even a spouse, partnerships are a popular business structure. According to recent figures, there are approximately 365,000 ordinary partnerships currently trading in the UK, making up about 7% of the business population.
Ordinary partnerships appeal to people for various reasons. By teaming up with others, you can share the costs, divide the workload, and manage risks together. Partners often bring different skills to the table, and this diversity can help strengthen the overall performance of the business. It also means that if one person is better with finances while another excels in sales or operations, those strengths can be distributed effectively.
Despite the many advantages, being part of a business partnership also comes with serious legal and tax responsibilities. One of the most important areas that partners need to understand is how Self Assessment works and what it means for them individually and as a business entity.
How Ordinary Partnerships Work in Legal Terms
An ordinary partnership, in contrast to a limited liability partnership or a limited company, does not create a separate legal entity. This means that the business and the partners are treated as the same for legal and financial purposes. All partners are personally liable for any business debts, even if those debts were incurred by one of the other partners.
This legal structure has implications for how tax is managed. Since the business isn’t viewed as separate from its owners, the profits generated by the business must be reported by the individual partners. Each partner pays tax on their share of the profits through the Self Assessment system. If the partnership incurs a loss, the loss may also be shared and reported accordingly.
Registering as a Business Partner for Self Assessment
If you become a partner in an ordinary partnership, you need to register for Self Assessment with HM Revenue and Customs (HMRC). This is required even if you have never been self-employed before or if the business has only just started trading. You will be taxed as an individual, based on the portion of the partnership’s profits allocated to you.
Self Assessment is HMRC’s method for collecting tax from individuals who don’t have their income taxed at source. Once registered, you’ll be responsible for calculating and reporting your income and expenses each year by submitting a tax return. You will also need to pay any tax and National Insurance contributions due.
Registering is straightforward and can be done online through HMRC’s website. After registering, you’ll be issued with a Unique Taxpayer Reference (UTR) number, which you’ll need whenever you communicate with HMRC or file your annual return.
Responsibilities of the Nominated Partner
Although each partner must take care of their own Self Assessment obligations, the partnership itself also needs to be registered with HMRC. One of the partners must be chosen to act as the nominated partner. This person is responsible for registering the business partnership for Self Assessment and for submitting the annual Partnership Tax Return (form SA800) on behalf of the business.
The nominated partner doesn’t have more liability or financial risk than the others, but they take on the task of liaising with HMRC and submitting the required documents for the partnership as a whole. That includes ensuring all income, expenses, and profit allocations are accurately reported.
When registering the partnership, the nominated partner will also receive a Unique Taxpayer Reference (UTR) for the partnership, separate from each individual partner’s UTR. Both sets of UTRs will be required when completing annual tax returns.
Record-Keeping Duties for Partnerships
Every business, whether run by a single person or multiple partners, must maintain proper financial records. In a partnership, this responsibility typically falls to the nominated partner, although it’s in the interest of all partners to ensure records are kept accurately.
HMRC can request to see the partnership’s financial records at any time. That includes sales invoices, purchase receipts, bank statements, mileage logs, payroll information (if applicable), and more. These records form the basis of the Self Assessment tax return and must be kept for at least five years after the filing deadline for the relevant tax year.
Good record-keeping not only helps with tax compliance but also makes it easier to manage cash flow, track business performance, and make decisions about future investment or expansion. Many partnerships choose to use bookkeeping software or hire an accountant to handle their records professionally.
When VAT Registration Becomes Necessary
VAT registration becomes mandatory when a business exceeds the VAT threshold, which is currently set at £90,000 in VAT-taxable turnover during any rolling 12-month period. If your partnership’s turnover goes over this figure, you must register for VAT and start charging VAT on your sales.
Once registered, you’ll also need to submit quarterly VAT returns and keep digital records in line with Making Tax Digital requirements. VAT registration can add administrative work but also offers benefits, such as reclaiming VAT on business purchases.
You can also choose to register voluntarily even if your turnover is below the threshold. Some businesses do this to gain credibility, particularly if they deal with other VAT-registered businesses and want to appear more established. It can also be helpful if you incur significant VAT on your costs.
If you’re unsure whether you need to register, it’s best to monitor your turnover monthly and seek advice before you cross the threshold. HMRC imposes penalties for failing to register on time, and you could be liable for backdated VAT and interest.
How Partnership Profits Are Shared and Reported
One of the key decisions made when forming a partnership is how profits will be divided. Most partnerships choose to share profits equally, but you can agree on any profit-sharing ratio that works for your business. It’s important to record this in your partnership agreement to avoid disputes.
The Partnership Tax Return will report the total profits made by the business and show how those profits are divided among the partners. Each partner must then report their individual share of the profit on their personal tax return. This is done using form SA104, which is submitted alongside the main Self Assessment return (SA100).
If the business makes a loss, the loss is usually split using the same proportions as the profits would have been. Partners can then use the loss to offset other income, which may reduce their overall tax bill.
It’s important that all figures submitted by the partnership and the individual partners match. If HMRC spots inconsistencies, it may trigger an investigation or delay in processing the return.
Managing Responsibilities When You’re in More Than One Partnership
Some individuals are involved in multiple business partnerships at the same time. In these cases, you must complete a separate SA104 form for each partnership, and each partnership must also file its own SA800 return. This can increase the administrative workload, but the rules remain the same: you must report your share of the profits or losses from each partnership.
You should take extra care to avoid duplication or omission of income. It’s helpful to keep separate financial records for each business and clearly label all correspondence with HMRC using the correct UTR for each entity.
If you have other sources of income—such as employment, rental property, dividends, or investments—these must also be reported on your Self Assessment return, along with your partnership income. That’s why understanding the full picture of your income for the year is essential before you file.
Understanding Payment Deadlines and Late Filing Penalties
The standard deadline for filing your Self Assessment tax return online is 31 January following the end of the tax year. For example, the 2023–24 tax return must be submitted by 31 January 2025. This date is also the deadline for paying any tax due.
For the Partnership Tax Return (SA800), the same 31 January deadline applies. If the SA800 is not filed on time, each partner can receive an automatic £100 penalty. This is charged regardless of whether you personally had anything to do with the delay. Penalties increase over time and can escalate significantly if the return remains outstanding.
It’s also important to budget for payments on account. If your tax bill exceeds £1,000 and less than 80% of your income is taxed at source, you may be required to make advance payments toward next year’s tax. These payments are due on 31 January and 31 July each year.
Failure to pay on time leads to interest charges and further penalties. That’s why it’s important to stay on top of your partnership’s records throughout the year and to prepare your tax return well before the deadline.
Filing Obligations of Business Partnerships
Once a business partnership is established and registered with HMRC, one of the most crucial annual tasks is the preparation and filing of tax returns. The partnership itself must file a return that outlines the income, expenses, and allocation of profits, while each individual partner is also required to complete and submit their own Self Assessment tax return. These responsibilities are ongoing and form a fundamental part of running a compliant business.
The nominated partner has specific duties, including submitting the Partnership Tax Return, but all partners are equally accountable when it comes to reporting their personal share of the profits. To avoid costly mistakes or penalties, it is essential to understand how the process works, what forms are required, and how income is declared in the context of Self Assessment. We will explore the forms used, the sequence of submissions, and the importance of getting your partnership income reported accurately.
What is the Partnership Tax Return (SA800)?
Every year, the nominated partner must file a Partnership Tax Return with HMRC. This form is known as SA800 and it provides a detailed summary of the partnership’s financial activity over the course of the tax year. It reports the total income earned by the partnership, the expenses incurred, and how the remaining profits or losses are divided among the partners.
The SA800 is essentially the central document that outlines the business’s taxable performance. It must be submitted whether or not the partnership made a profit, as long as it was trading during the tax year. It is the responsibility of the nominated partner to ensure that all figures are complete, accurate, and submitted by the deadline of 31 January following the end of the tax year.
In addition to income and expenses, the return may include supplementary pages if the partnership has received other types of income, such as interest, dividends, or capital gains. It’s essential that the figures reported match the supporting documents and bookkeeping records maintained throughout the year.
How Profit Shares Are Allocated in the SA800
One of the most important sections of the SA800 return is the breakdown of how profits or losses are shared between the partners. This must align with the terms agreed in the partnership agreement, whether that’s an equal split or based on a specific profit-sharing ratio.
Each partner’s share must be clearly documented, including the percentage of profits and losses that apply to them. This information is crucial because it determines what each individual must report on their personal Self Assessment return.
Any inconsistency between what the partnership return shows and what individual partners declare can raise questions with HMRC, potentially resulting in delays or an enquiry. That’s why coordination between partners is so important when tax returns are being prepared and submitted.
Each Partner Must Submit a Personal Tax Return (SA100)
In addition to the SA800 filed on behalf of the partnership, each partner must complete and file their own individual Self Assessment return, using form SA100. This is the main eight-page tax return where all sources of income are declared, including earnings from the partnership.
Partners must not assume that the submission of the SA800 alone covers their obligations. The SA100 is where HMRC assesses each person’s overall tax liability based on total income, tax reliefs, and allowances.
For those who also receive income from employment, pensions, savings, property, or investments, those amounts must be included alongside partnership income. This provides HMRC with a full picture of the taxpayer’s financial situation for the year.
Supplementary Page SA104 for Partnership Income
To report income from the partnership, each partner must include supplementary page SA104 as part of their SA100 return. The SA104 provides detailed information on the income or loss received from the business partnership. It includes the UTR of the partnership, the business name, and the individual’s share of profit or loss.
There are two versions of the SA104: the short version and the full version. Most small or straightforward partnerships use the short version, while the full version is used if there are more complex figures to declare, such as capital allowances or adjustments.
It’s essential that the figures declared on the SA104 match the allocation in the SA800 return. Discrepancies between these forms can lead to issues with HMRC, even if they are due to clerical errors. For this reason, many partnerships coordinate the preparation of all returns at the same time and check for consistency before submission.
What If You’re in More Than One Partnership?
It’s not uncommon for individuals to be involved in more than one partnership, especially in certain sectors such as law, medicine, or consultancy. If you are part of more than one ordinary partnership, you must complete a separate SA104 for each one. Similarly, a separate SA800 must be filed for each partnership by the nominated partner.
Each partnership has its own UTR and must be treated as a distinct entity. Income or losses from one cannot be combined with another when completing the SA104 forms. This can make the Self Assessment process more time-consuming and complex, but the same principles apply: accurate reporting, proper allocation, and timely submission.
Keeping separate financial records for each business is strongly recommended to avoid confusion and ensure that you’re able to produce the right information when needed.
Penalties for Late or Incorrect Submissions
Failing to meet Self Assessment deadlines can lead to automatic penalties. If the SA800 is submitted late, each partner is fined £100, even if the delay was unintentional or due to a small oversight. If the delay continues, additional penalties apply after three, six, and twelve months. These can escalate into hundreds or even thousands of pounds, depending on the circumstances.
Similarly, if your personal SA100 or SA104 forms are submitted late or contain errors, you may face penalties and interest on unpaid tax. HMRC expects all taxpayers to exercise reasonable care when completing their returns. If an error is discovered that leads to an underpayment of tax, HMRC may charge a penalty based on how the error occurred—whether it was careless, deliberate, or deliberate and concealed.
It’s important to ensure that the partnership’s records are accurate and up to date throughout the year, not just in the weeks leading up to the deadline. This reduces the risk of errors and gives everyone time to check the figures before submission.
Claiming Allowable Expenses Through Your Return
One of the advantages of operating as a partnership is the ability to claim business expenses that reduce the amount of tax owed. These are known as allowable expenses and include things like office rent, utility bills, travel costs, equipment, business insurance, and professional fees.
These expenses are claimed through the SA800, which reports the partnership’s overall income and costs. Once allowable expenses have been deducted, the remaining profit is what gets shared between the partners and reported on each SA104.
It’s essential that only legitimate business costs are claimed. HMRC has strict rules on what constitutes an allowable expense. For example, you can claim for phone and internet use that’s related to your business, but not for personal usage. Likewise, travel expenses are only allowable if they are incurred wholly and exclusively for business purposes.
By reducing the taxable profits of the partnership, allowable expenses lower each partner’s tax bill. This makes it especially important to keep good records of all purchases, invoices, and receipts throughout the tax year.
Understanding Adjustments and Reliefs
Sometimes, adjustments need to be made to the income reported by the partnership before tax is calculated. These may relate to capital allowances, losses brought forward from previous years, or income that is exempt from tax.
For example, if the partnership bought new equipment or a vehicle during the year, it may be able to claim a capital allowance, which allows the business to write off the cost over time. These adjustments are reported on the SA800 and reflected in the final figures allocated to each partner.
Additionally, if the business made a loss in the tax year, each partner may be able to offset their share of that loss against other income, either in the same tax year or by carrying it forward or backward, depending on eligibility. This can provide valuable tax relief and reduce the overall bill. Understanding when and how to apply these adjustments requires careful attention to HMRC’s guidance, and sometimes professional advice is useful when the figures become more complex.
Payments on Account and Balancing Payments
Partners who owe more than £1,000 in tax after submitting their return may be required to make payments on account. These are advance payments toward the next year’s tax bill, split into two installments: one due on 31 January and the other on 31 July.
These payments are calculated based on your previous year’s liability. If your profits are expected to decrease significantly, you can apply to reduce your payments on account. However, if your profits increase and your payments on account fall short, you will owe a balancing payment by the following 31 January.
Failing to make payments on account when required can result in interest charges, so it’s important to budget throughout the year and not rely on last-minute funds. Each partner is responsible for managing their own tax obligations, regardless of the partnership’s overall performance.
Making Corrections to a Submitted Tax Return
Even when you take great care to ensure that your Self Assessment return is accurate, mistakes can happen. For partners in a business partnership, correcting an error as soon as it’s identified is important not only for the individual but also for the partnership as a whole. Any correction to personal tax returns or the Partnership Tax Return can affect everyone involved, especially when the profit shares are redistributed or expenses need reallocation.
If you realise that a mistake has been made on your Self Assessment return, you can usually make changes online within 12 months from the original deadline. For instance, if your 2023–24 tax return was submitted online and the deadline was 31 January 2025, you have until 31 January 2026 to make an amendment. After that, you would need to write to HMRC explaining the correction, which can take longer and require supporting documentation.
In the case of partnership tax returns, only the nominated partner can amend the SA800. Each partner must then make sure their own SA104 and SA100 forms reflect the new figures. Any update that affects the profit or loss allocation must be handled carefully to ensure the changes are correctly mirrored across all documents.
Timely corrections help you avoid interest or penalties on underpaid tax. They also allow HMRC to assess your revised tax position fairly, rather than raising questions later that may be more difficult to resolve.
What Happens if HMRC Opens an Enquiry
From time to time, HMRC may choose to investigate a tax return, even if it was submitted on time and appears accurate. An inquiry does not necessarily mean that something is wrong. Sometimes, it is triggered at random, and other times it is the result of figures not aligning, unusual claims, or missing information.
For business partnerships, HMRC can open an enquiry into the SA800 Partnership Tax Return, the SA100 returns of individual partners, or both. If an enquiry is opened, HMRC will write to the nominated partner and request records or explanations. Depending on the scope of the investigation, it may ask for copies of invoices, receipts, bank statements, or partnership agreements.
The enquiry period generally lasts up to 12 months from the date the return was submitted, although it can be longer in more complex cases or if suspected fraud is involved. All partners should cooperate fully with the enquiry process and ensure records are made available as needed.
If errors are found, HMRC may adjust the tax position of each partner and issue penalties or interest where appropriate. Being transparent and responsive can help reduce the severity of any consequences and may prevent further scrutiny in the future.
Avoiding Common Filing and Reporting Errors
The Self Assessment process can be confusing for first-time partners or those unfamiliar with the specific requirements of business partnerships. Several common mistakes can easily be avoided with better awareness and preparation.
One frequent error is failing to register for Self Assessment on time. Some partners mistakenly assume that the nominated partner’s registration covers everyone, when in fact each individual must register separately. Another common mistake is filing late or failing to submit the SA104 supplementary page alongside the SA100, which can lead to an incomplete return.
Miscalculating profit shares is another issue. Partners must ensure that the figures submitted in their individual returns match the ones reported in the SA800. Misalignment in income declarations can trigger enquiries and cause delays in HMRC’s processing of the returns.
Relying solely on memory or informal notes to prepare your tax return is risky. Every figure reported must be supported by documentation, whether that’s invoices, receipts, contracts, or bank statements. Creating a system to store and organise your records throughout the year can prevent confusion and reduce stress when deadlines approach.
Disputes Over Profit Shares and Tax Consequences
Although many partnerships begin with a sense of trust and mutual understanding, disagreements can arise over time—particularly concerning profit shares. If one partner feels they are doing more work but receiving the same as others, or if costs are distributed unevenly, tensions may develop. These disputes are not just internal matters; they can affect how income is reported on tax returns and cause discrepancies that attract HMRC attention.
A properly drafted partnership agreement can help prevent such issues. This document should outline how profits and losses are shared, what happens in the event of a partner leaving, how disputes are resolved, and what each partner is expected to contribute. If your agreement specifies an unequal distribution of profits, this must be clearly reflected in the SA800 return and each partner’s corresponding SA104 form.
If changes are made mid-year, such as introducing a new partner or amending the profit-sharing ratio, documentation should be updated immediately. All partners should agree in writing to the new terms, and the tax reporting must follow these changes accurately.
When disputes arise that can’t be resolved internally, mediation or legal advice may be necessary. Keeping tax reporting in line with documented agreements is critical to avoid penalties and to maintain fairness among all partners.
Preparing for Tax Efficiency as a Partner
Although much of Self Assessment is about compliance, there are also opportunities to make your tax position more efficient. As a business partner, you can benefit from legitimate tax planning strategies that reduce liability and improve cash flow.
One of the most effective ways to do this is by making full use of allowable expenses. From office supplies and phone bills to professional services and vehicle costs, every business-related expense can reduce the partnership’s taxable profit if correctly claimed. Ensuring that all eligible costs are captured and recorded throughout the year helps lower the income each partner must report.
Another strategy involves timing large expenses or capital investments. If you plan to purchase new business equipment or upgrade your workspace, making those investments before the end of the tax year can boost your deductions and reduce the final tax bill. Similarly, capital allowances may be available for longer-term purchases like vehicles, machinery, or software.
Personal tax planning also plays a role. Depending on your total income, you may benefit from pension contributions, charitable donations, or income-splitting between spouses. Some of these strategies affect your overall tax position rather than just the partnership income, but they are worth considering if you are trying to reduce your Self Assessment bill. Working with a financial adviser or accountant familiar with partnerships can be valuable when structuring your finances and deciding how best to approach the year-end process.
Leaving or Joining a Partnership and Its Tax Impact
The makeup of a business partnership may change over time. New partners might be introduced, and others may retire or leave. When this happens, the tax reporting obligations for the year must reflect the changes accurately.
If a partner leaves mid-year, their share of the profits must be calculated only for the period they were involved in the business. The SA800 must record the date they left and allocate income up to that point. Their individual SA104 should reflect this partial-year income. Similarly, when a new partner joins, their income starts from the day they became part of the business.
Failing to report these changes correctly can result in income being over- or under-reported, which may trigger amendments, enquiries, or fines. It also complicates the sharing of liabilities if penalties are imposed, especially if the partner in question is no longer part of the business. Whenever a structural change takes place, it is advisable to update your partnership agreement, inform HMRC, and record everything clearly in the annual tax return.
Digital Tax and Making Tax Digital for Partnerships
Making Tax Digital is a government initiative aimed at simplifying tax reporting by requiring businesses to maintain digital records and submit tax data electronically. Although the full rollout has been delayed in some areas, partnerships with VAT obligations must already comply with Making Tax Digital for VAT.
Future phases are expected to include Income Tax Self Assessment for partnerships. When this happens, businesses will need to keep digital records and submit quarterly income and expense summaries to HMRC, along with an annual return.
This shift to digital reporting means that partnerships should begin preparing now by adopting software that is compatible with HMRC’s requirements. Choosing the right tools can streamline the record-keeping process, reduce errors, and make year-end filings faster and more accurate.
Even if your partnership is not yet mandated to comply with Making Tax Digital for income tax, moving toward digital record-keeping is a smart move. It helps ensure that your financial data is secure, accessible, and ready to support your tax reporting obligations.
Getting Help When You Need It
Managing Self Assessment as a business partner can become complex, particularly when your financial affairs involve multiple sources of income or when you are part of more than one partnership. If you’re unsure about how to complete your SA100 or SA104 forms, or if you need help preparing the SA800 return for your partnership, getting professional assistance can save you time and help avoid mistakes.
An accountant or tax adviser familiar with partnership taxation can provide tailored advice on profit allocations, expense claims, capital allowances, and tax relief opportunities. They can also help if HMRC raises questions or if your return needs to be amended.
Although partners can complete and submit their tax returns independently, it’s important to weigh the risks of making a mistake. Even small errors can lead to penalties, and discrepancies between the SA800 and SA104 forms are closely scrutinised.
Knowing when to seek support can be just as valuable as understanding the rules. Your responsibilities as a partner extend beyond simply filing on time, they involve keeping accurate records, understanding your tax obligations, and ensuring that all reporting is aligned and correct.
Conclusion
Being in a business partnership brings shared responsibilities, mutual benefits, and the potential for strong collaborative success. However, it also comes with legal and financial obligations that each partner must understand and actively manage. One of the most significant responsibilities is navigating the Self Assessment system and meeting all related tax duties.
Each partner is individually accountable for registering with HMRC, submitting their Self Assessment tax return, and accurately reporting their share of the partnership’s profits or losses. The nominated partner carries additional duties, such as registering the partnership itself, filing the SA800 Partnership Tax Return, and ensuring that financial records are maintained and aligned across all partners’ submissions.
From registration and record-keeping to filing returns and claiming allowable expenses, every step requires attention to detail, accurate communication, and a clear understanding of what HMRC expects. The complexities increase when a partner is involved in more than one partnership, when there are structural changes within the business, or when disputes arise over profit shares. In such cases, coordination and transparency become even more essential to remain compliant and avoid costly mistakes.
By keeping thorough financial records, filing on time, and understanding the importance of forms like the SA100, SA104, and SA800, business partners can avoid penalties, manage their tax obligations more effectively, and maintain a smooth relationship with HMRC. Embracing digital tools and preparing for future tax reforms like Making Tax Digital will only help streamline this process further.
Ultimately, the key to success in any partnership lies in clear agreements, accurate reporting, and shared responsibility. When each partner understands their role within Self Assessment and remains proactive about compliance, the partnership is better positioned to grow, stay financially healthy, and achieve its long-term goals.