A UK partnership does not pay business tax itself. Instead, the partnership’s profit is split between the partners, and each partner pays Income Tax and National Insurance on their own share through Self Assessment. In 2026/27, that means 20% Income Tax on taxable profit up to £50,270 and Class 4 National Insurance at 6% on profits between £12,570 and £50,270.
How Business Tax Works for a Partnership
The single most important thing to understand about partnership tax is that the partnership is transparent for tax purposes. Unlike a limited company, which pays Corporation Tax on its own profits, a general partnership has no tax bill of its own. HMRC looks through the partnership to the people behind it.
Here is how it works in practice. First, the partnership works out its taxable profit: total income minus allowable expenses, such as rent, stock, insurance, accountancy fees and a reasonable share of phone and travel costs. Then that profit is divided according to the profit-sharing agreement. With no written agreement, the default under the Partnership Act 1890 is an equal split — one very good reason to put your agreement in writing before the money starts coming in.
Each partner then reports their share on their own Self Assessment tax return and pays tax on it as if it were their own self-employed income. The rates are the same as for a sole trader, which is why our guide to business tax for sole traders is a useful companion read. What changes in a partnership is not the rates, but how the profit is split — and that split decides everything.
What Each Partner Actually Pays in 2026/27
For 2026/27, a partner in England, Wales or Northern Ireland pays two things on their share of the profit. Scotland has its own Income Tax bands, so Scottish partners should check the Scottish rates on GOV.UK.
| Charge | 2026/27 rule | Rate |
|---|---|---|
| Personal Allowance | First slice of income, tax-free | £12,570 |
| Income Tax — basic rate | Taxable income £12,571 to £50,270 | 20% |
| Income Tax — higher rate | Taxable income £50,271 to £125,140 | 40% |
| Income Tax — additional rate | Taxable income over £125,140 | 45% |
| Class 4 National Insurance | Profits £12,570 to £50,270 | 6% |
| Class 4 National Insurance | Profits above £50,270 | 2% |
| Class 2 National Insurance | Profits £7,105+: treated as paid, £0. Below: voluntary £3.65 a week | £0 / £3.65 a week |
Note: the Personal Allowance shrinks by £1 for every £2 of income over £100,000 and disappears at £125,140.
Two points catch new partners out. First, you pay tax on your share of the profit, not on the money you actually drew from the business. If your share is £30,000, your tax is worked out on £30,000 even if you only took £20,000 out and left the rest in the business account. Second, your partnership share is added to any other income you have — a part-time job, rental income or freelance work — so other income can push your partnership profit into a higher tax band.
The Partnership Return and Your Own Return
A partnership files two layers of return. The partnership itself files a partnership tax return (form SA800), reporting total income, expenses and profit, and each partner’s share. One partner takes responsibility for this: the nominated partner, who registers the partnership with HMRC, files the SA800 and keeps the other partners informed.
Every partner must also register individually and file their own personal tax return (form SA100), reporting their share of the profit. You can register as a partner for Self Assessment on GOV.UK. The deadline is 5 October after the end of the tax year in which you became a partner — for example, 5 October 2027 if you became a partner during 2026/27. Each partner needs their own Unique Taxpayer Reference (UTR), and the partnership has one of its own too.
If the partnership’s VAT-taxable turnover passes £90,000 in any rolling 12 months, it must also register for VAT — a separate obligation on top of Income Tax.
Worked £ Example: An £80,000 Profit Split 60/40
Imagine two partners, Sara and James, running a design partnership. In 2026/27 it makes £80,000 of taxable profit after expenses, split 60/40: Sara’s share is £48,000 and James’s is £32,000. Here is what each pays, assuming neither has any other income:
| Partner | Profit share | Income Tax (20% above £12,570) | Class 4 NI (6% above £12,570) | Total bill |
|---|---|---|---|---|
| Sara (60%) | £48,000 | 20% × £35,430 = £7,086.00 | 6% × £35,430 = £2,125.80 | £9,211.80 |
| James (40%) | £32,000 | 20% × £19,430 = £3,886.00 | 6% × £19,430 = £1,165.80 | £5,051.80 |
| Partnership total | £80,000 | £10,972.00 | £3,291.60 | £14,263.60 |
Notice how the split changes the picture. While both partners stay inside the basic-rate band, the total bill is the same whatever the ratio: an equal £40,000/£40,000 split gives £5,486 in Income Tax and £1,645.80 in Class 4 NI each, the same £14,263.60 combined. The split only changes the total once one partner crosses into the 40% band while the other still has basic-rate room left. That is why an accountant’s advice on profit-sharing ratios can be worth real money as the business grows — but the ratio must reflect a genuine agreement, not a tax dodge.
For a smaller illustration, a partner with a £30,000 share pays £3,486 in Income Tax plus £1,045.80 in Class 4 NI — £4,531.80 in total, with Class 2 treated as paid at no extra cost.
Deadlines and Payments on Account
Partnership tax runs on the same Self Assessment calendar as sole traders, and the dates are unforgiving: a late partnership return and late personal returns can each attract their own penalty, starting at £100 per return.
| Deadline | What is due |
|---|---|
| 5 October after the tax year | Register as a partner, and register the partnership if you are the nominated partner |
| 31 October after the tax year | Paper Self Assessment returns (partnership and personal) |
| 31 January after the tax year | Online returns, plus the tax bill for the year just ended and the first payment on account towards next year |
| 31 July | Second payment on account towards the current year’s bill |
Payments on account deserve a plain explanation, because they surprise first-year partners. If your tax bill is over £1,000, HMRC asks you to pay next year’s bill in advance, in two instalments of half last year’s bill each — on 31 January and 31 July. So in your second year you can owe last year’s balancing payment plus half of next year’s bill on the same January day. Set aside 25–30% of every drawing into a separate tax pot, so January never comes as a shock.
Partnership, LLP or Limited Company?
Not every business run by two or more people is taxed as a partnership, and the structure you choose changes the tax completely:
| Structure | How it is taxed | Key difference |
|---|---|---|
| General partnership | Each partner pays Income Tax + NI on their share | Simple, but personal liability for debts |
| Limited liability partnership (LLP) | Members taxed like partners | Companies House registered; limited liability |
| Limited company | Corporation Tax (19% to £50,000); directors taxed on salary/dividends | More admin, limited liability |
As a rough rule of thumb, partnerships suit smaller businesses where the owners want simplicity and are comfortable with personal liability. Once profits grow large, or the business takes on real risk, ask an accountant to cost out the limited-company route — the crossover point is different for every business.
5 Mistakes Partners Keep Making
1. No written profit-sharing agreement. Without one, the default is an equal split, whatever each partner contributed. Write it down, and update it when roles change.
2. Only the nominated partner registers. Every partner must register individually. A partner who assumes the partnership return covers them will face a late-filing penalty.
3. Paying tax on drawings instead of profit share. HMRC taxes your share of the profit, whether you drew it or left it in the business.
4. Forgetting payments on account. Budget for the January double bill from your very first year.
5. Ignoring losses. A partner’s share of a loss can usually be set against other income or carried forward — but only if it is reported properly on the returns.
Frequently Asked Questions
Does a partnership pay Corporation Tax? No. A general partnership does not pay Corporation Tax. The profit is split between the partners and each partner pays Income Tax and National Insurance on their share through Self Assessment.
Who files the partnership tax return? The nominated partner files the partnership return (SA800). Each partner then files their own personal return (SA100) reporting their share.
What if the partners disagree on the profit split? The split follows your partnership agreement. Without an agreement, the default under the Partnership Act 1890 is an equal share for each partner, regardless of who did more work or put in more money.
Do partners pay National Insurance? Yes. Partners pay Class 4 National Insurance at 6% on profits between £12,570 and £50,270 and 2% above that in 2026/27. Class 2 is treated as paid at no extra cost once profits reach £7,105.
Conclusion
Business tax for a partnership is simpler than it looks: no partnership tax bill exists, only each partner’s bill on their share of profit. Get three things right and most of the pain disappears — a written profit-sharing agreement, registration for every partner (not just the nominated partner), and a tax pot fed from every drawing so the January bill never ambushes you. If your profits are climbing fast or your personal liability worries you, ask an accountant to cost the LLP or limited-company route before the next tax year starts.
