Self Assessment: Partner

Contents

What if I have just started self employment as a partner or am thinking of starting self employment as a partner?

When you start working for yourself, you will need to register as self-employed with HM Revenue & Customs (HMRC). The Starting up in Business section provides full details of how to register and provides details of the main tax and National Insurance issues involved in running a business.

What is Self Assessment?

Many self-employed people wanted a tax system that is easier to follow.

The key features of Self Assessment include:

  • a current year basis of assessment
  • one main point of contact for their tax affairs
  • fixed, automatic penalties for late returns
  • clear obligations for keeping records.

The current year basis of assessment
An important feature for self-employed taxpayers is the introduction of the current year basis of assessment. The starting date for this depends on when you started your business.

Under the old system, your tax assessment was based upon your trading profits for the 12 month period ending in the tax year before the year covered by the return. There were complicated rules at the start and finish of the business.

This changed under Self Assessment. Tax is now calculated on the profits arising in the tax year itself. If your accounting period is different from the tax year, then tax will be calculated on the profit arising in the 12 month accounting period ending in the tax year.

If you became self-employed or your business partnership started on 6 April 1994 or later you will have been taxed from the start on the current year basis.

How does Self Assessment affect me?

You are self-employed if you are in business on your own and do not operate through a limited company. This might involve supplying goods or services through a one-person business or a business employing others. You will also be self-employed if you are a partner, either in a large partnership or with only one partner.

For more information on partnerships see 'Partnerships'.

If you are self-employed, you have always needed to fill in a tax return. This has not changed and if you work for yourself – that is, you are self-employed or in partnership you will need to complete a Self Assessment tax return.

Further details can be found in the new guidelines for Self Assessment tax returns

What records should I keep?

Until recently there was no legal requirement to keep records for income tax, although Customs & Excise require registered traders to keep records for VAT. However, we have always advised businesses that it was in their own interests to keep all the records needed to help prepare accounts and tax returns. Rules introduced in the 1994 Finance Act mean that you now need to keep all appropriate records.

We will normally expect you to:

  • record all sales and other business receipts as they come in, and retain the record
  • keep back-up records, for example, invoices, bank statements and paying-in slips to show where the income came from
  • record all purchases and other expenses as they arise, and ensure - unless the amounts are very small - that you have, and retain, invoices for them
  • keep a record of all purchases and sales of assets used in your business
  • record all amounts taken out of the business bank account, or in cash, for you or your family's personal use
  • record all amounts paid into the business from personal funds, for example, the proceeds of a life assurance policy.

You will have to retain your records for five years from the latest date by which your tax return is to be filed.

More information on keeping records can be found in SA/BK4 - A general guide to keeping records.

How do I complete and send back my Tax Return?

If you are a partner you will need to fill in:

  • the core Tax Return (SA100)
  • the partnership supplementary pages (Short version SA104 or Full Version (SA104F)
  • any other supplementary pages which apply to you i.e. Capital Gains. Please refer to page 2 of the Tax Return.

Your Self Assessment tax return pack includes a step-by-step guide on how to fill in each section of your return together with a guide on how to calculate your tax if you want to.

Note: You will not be sent the Tax Return Guide (SA150) and Tax Calculation (SA151W or SA151C) if you send in your return electronically or your agent/tax adviser sends in your return. However these guides can be viewed and/or downloaded from this site - see below.

The Partnership Tax Return is completed by the nominated partner and includes a Partnership statement summarising the profits, losses, income and other amounts allocated to the partners.

The nominated partner should make sure that the information which individual partners need to complete their personal Tax Returns is provided to them as quickly as possible.

There are two types of Partnership Statement:

  • A 'short' abridged version if your only partnership income was a share of trading or professional income; or interest with tax deducted from banks, building societies or deposit takers.
  • A 'full' version if you have any other partnership income.

There are corresponding 'short' and 'full' versions of the Partnership pages. If you receive a 'short' Partnership statement you will complete the short Partnership pages and similarly with the 'full' version.

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How and when do I pay my tax?

You will need to pay any tax due by 31 January after the end of the tax year covered by the return.

You may also have to make two payments on account for the tax year before the return for that year is due.

Payments on account will be made on:

  • 31 January in the tax year and
  • 31 July after the end of the tax year (six months later).

If these two payments amount to more or less than the tax which actually becomes due for that tax year, then a balancing payment (or repayment) will be due on the following 31 January.

How much will you pay on account?

If you calculate your own tax, you will also calculate your own payments on account. Each payment on account will be one half of the income tax bill for the previous year after deducting tax paid at source, eg PAYE.

If we calculate your tax for you, we will also tell you if you have to make payments on account and how much.

You will not need to make payments on account:

  • if your income tax bill for the previous year was less than £500 (this limt will be increased to £1000 from 2009/10)
  • more than 80 per cent of your income tax for the previous year was paid by deduction at source, eg under PAYE
  • for Capital Gains Tax.

In some circumstances, you can ask to reduce your payments on account. The Tax Return Calculation Guide will tell you when you can do this.

Options for payment

There are a number of different options available for paying your tax. For details visit the Payments pages.

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