Partnership Tax: How Partners Are Taxed in the UK

Partnership tax on profits is paid by the partners, not the business. The partnership reports its profit to HMRC on a partnership tax return. Each individual partner then pays any Income Tax and Class 4 National Insurance due on their share through their own Self Assessment return. A company partner pays Corporation Tax instead.

In a partner’s first year, the January payment can be half as big again as the tax bill itself. That’s payments on account at work, and in the worked example below a £12,208.60 bill becomes £18,312.90 due on 31 January 2028.

The sections below start with individual partners in an ordinary partnership, then cover LLP members and company partners. A few things change the partnership tax figures: living in Scotland, accounts that end outside 31 March to 5 April, and an LLP that isn’t run to make a profit.

If you’re still choosing a business structure, the sole trader or partnership comparison covers that decision.

Partnership tax on profits falls on the partners

How are partnerships taxed in practice? HMRC looks through the business to the people who own it.

The profit is worked out at partnership level, but the partnership has no tax bill of its own on it. Each partner is taxed on their own slice instead, as GOV.UK’s guide to setting up a business partnership confirms.

That holds for an ordinary partnership (HMRC’s Partnership Manual also calls it a general partnership), a Scottish partnership and an LLP alike.

A Scottish partnership has legal personality of its own, which an ordinary partnership in England, Wales or Northern Ireland lacks, yet HMRC taxes it the same way.

In practice, the paperwork runs like this:

• The nominated partner sends the partnership Self Assessment return, with a Partnership Statement showing how the profit is shared out.
• Each partner copies their figures from that statement into the partnership section of their own return (on paper, the SA104S or SA104F pages).
• HMRC uses that return to check the tax and Class 4 on every share, and no partner is liable for more than the tax on their own share.

VAT runs the other way. A partnership that registers does so as one business, listing each partner on form VAT2.

VAT registration is compulsory once taxable turnover over the previous 12 months tops £90,000, or when you expect it to pass £90,000 within the next 30 days. Registering below that line is optional, and one reason to do it is reclaiming VAT on business purchases.

Once registered, the partnership files its VAT returns through compatible software, as Making Tax Digital for VAT requires.

£84,000 profit, two partners, two tax bills

Say Asha and Ben run a partnership with £84,000 of taxable profit for the year to 5 April 2027. Their partnership agreement gives Asha two-thirds and Ben one-third.

The agreement matters. Without one saying otherwise, the Partnership Act 1890 shares profits equally.

Both live outside Scotland, have no other income and are in their first year of Self Assessment.

Here’s how 2026–27 rates apply to each share:

• Asha’s £56,000 share carries £9,832.00 of Income Tax and £2,376.60 of Class 4, a total bill of £12,208.60.
• Ben’s £28,000 share carries £3,086.00 of Income Tax and £925.80 of Class 4, a total bill of £4,011.80.
• The partnership itself owes no Income Tax or National Insurance on the £84,000.

Each share is taxed as that partner’s own income, using the standard Income Tax rates and bands. The first £12,570 falls within the Personal Allowance. After that, 20% applies up to £50,270 and 40% from there to £125,140. Asha’s share reaches the higher rate; Ben’s doesn’t.

Do partners pay National Insurance? Yes, once a share goes above £12,570: Class 4 takes 6% of the profit between £12,570 and £50,270, and 2% of anything above £50,270.

For Class 2, nothing is due: it counts as paid for both of them because each share is £7,105 or more.

Put together, the two partners owe £16,220.40 for the year.

Asha’s January payment is bigger than her bill, though, because of payments on account. These are two advance payments towards the next year’s tax, each worth half of this year’s Income Tax and Class 4, due on 31 January and 31 July.

They apply unless last year’s bill was under £1,000, or more than 80% of it was paid outside Self Assessment. The £1,000 test uses Income Tax minus any tax deducted at source, plus Class 4, and Capital Gains Tax doesn’t count towards it.

Neither partner had tax deducted at source, so payments on account apply to both. By 31 January 2028, Asha pays £18,312.90 (her £12,208.60 bill plus £6,104.30 on account) and Ben pays £6,017.70 (£4,011.80 plus £2,005.90). The same on-account amounts fall due again on 31 July 2028.

Other circumstances change the figures. Scottish taxpayers have different Income Tax bands, for example.

Where a partnership’s accounts end outside 31 March to 5 April, profit may need to be apportioned to the tax year. The nominated partner may then need to pass on extra figures for the months after the accounts close.

The nominated partner files the partnership tax return

One partner has to take the nominated partner role: they handle the tax returns for the business and hold on to its records. If the partners don’t choose one, HMRC can nominate someone.

Registration comes first, and it’s the nominated partner’s job to register a partnership with HMRC. The deadline is 5 October in the business’s second tax year, and a penalty can follow if it’s missed.

Each partner registers separately as well, and the SA401 is the paper form for that. HMRC issues the partnership its own 10-digit partnership UTR, separate from each partner’s.

The nominated partner then sends the SA800 partnership tax return, online or on paper. For 2026–27, the partnership tax return deadline is 31 January 2028 online, or 31 October 2027 on paper.

Each partner’s own return runs to the same two dates. HMRC can allow longer if its notice to file came after 31 July 2027, or if a company is one of the partners.

To file online, HMRC’s SA800 notes say you register for its online service and then buy commercial software.

A late return costs every partner, not only the nominated one. For each person who was a partner during the return period, HMRC charges:

• £100 as soon as the return is late.
• £10 a day once it’s more than 3 months late, for up to 90 days (£900).
• £300 once it’s more than 6 months late, and a further £300 once it’s more than 12 months late.

A late partnership return can also make the partners’ own returns late, and those pick up automatic penalties of their own.

Keep the records behind the 2026–27 return until at least 31 January 2033.

Do you need an accountant for a partnership tax return? HMRC lets a partnership name an agent to handle its tax affairs, but the responsibility doesn’t move. If an accountant or anyone else fills in the partnership return, a partner still signs it, and the partners answer for its accuracy.

Making Tax Digital for Income Tax doesn’t cover partnerships yet, and HMRC has said it’ll set out a timeline later. Until then, the annual partnership return carries on as it is.

If you also have sole trader or property income above the qualifying threshold, you may need to sign up for that income.

Your partnership share then goes into your tax return through the same Making Tax Digital software.

LLP tax follows partnership rules, with exceptions

A limited liability partnership is a separate legal person, registered at Companies House, with at least two members who can be people or companies. For tax, each member is taxed on their own slice of the profit, just as partners in an ordinary partnership are.

Liability is where it differs. Members aren’t personally liable for debts the LLP can’t pay.

Every LLP needs at least two designated members at all times, and their extra duties include:

• They register the LLP for Self Assessment with HMRC and register separately as individuals.
• They register the LLP for VAT if sales are expected to go over £90,000 a year.
• They keep the accounting records and send annual accounts and a confirmation statement to Companies House.

Every other member registers for Self Assessment as well, and individual members can use the SA401 form for that.

A few points take an LLP away from the ordinary partnership rules:

• An LLP whose business isn’t carried on with a view to profit, or which is being wound up formally, may need to file a Corporation Tax return instead.
• A member who meets all three salaried member conditions is taxed as an employee, with the LLP running PAYE on their earnings.
• An LLP can’t use the cash basis to work out its profit.

Limited partnerships are different again. They need at least one partner of each kind, general and limited, a limited partner’s liability stops at what they’ve put in, and every partner is taxed on their share.

Company partners pay Corporation Tax instead

Can a limited company be a partner in a partnership? Yes, because in law a company is a person in its own right.

Its share of the profit is worked out under Corporation Tax rules, not Income Tax rules. A partnership with individual and company partners may need two sets of Partnership Statements, one on each basis.

Mixed partnerships come with extra conditions:

• Special rules govern how profit is allocated between individual and company members.
• The partnership can’t use the cash basis or simplified expenses.
• Its partnership return deadline may be later than usual.

Registration for a company partner uses form SA402 rather than the SA401 used by individuals.

Your next step on partnership tax

Partnership tax comes down to one return from the business and one from each partner. The partnership return sets out the profit and who gets what, and each partner’s own return is where their Income Tax and Class 4 are paid.

For 2026–27, the partnership return and each partner’s online return are due by 31 January 2028, and a late partnership return costs every partner.

In a first year, a payment on account can sit on top of the bill itself. If you’re an LLP member or your partnership includes a company, check the rules for your structure before you file.

When the Partnership Statement arrives, your figures go into the partnership section of your own return, known on paper as the SA104 partnership pages.

Key Takeaways

• No Income Tax falls on the partnership itself; every partner is taxed on their own slice of the profit.
• For 2026–27, the partnership tax return is due by 31 January 2028 online, or 31 October 2027 on paper, and lateness costs each partner £100 at first.
• In a partner’s first January, a payment on account can add half the bill again, unless the bill was under £1,000 or over 80% was paid at source.
• LLP members are taxed like partners, with exceptions such as salaried members, who are taxed as employees.
• Making Tax Digital for Income Tax doesn’t cover partnerships yet, while a VAT-registered partnership already files its VAT returns through compatible software.