Partnership tax question

omelette · Feb 20, 2009

I am just starting up a partnership with my friend but we're a bit unsure what tax we will need to pay.

We both work full time at the moment and can't afford to quit our jobs yet so the partnership will be on top of our jobs for now.

We are planning on contacting hmrc but can anyone give me an idea what we would pay?

Would we take the profits from the partnership and pay tax on that separate to our individual income tax or perhaps halve the profits from the partnership and each add that to our individual income tax?

We are not planning on taking a wage from the partnership but i suppose this doesn't make any difference to what we are taxed.

Any help on this would be great.

Thanks,
Emily

nasirs · Feb 22, 2009

You are paying PAYE and the profits you will make from partnership will be added to your gross income and you will need to pay the tax seperate on that partnership income.

Now the question is what tax band you are in, there is a possibility that you are under basic rate which is 21% for 2009/10 for income upto £37,400 from the employment and the partnership income could put you under higher rate which is 40%.

Seek some professional advice on this as you might need an accountant who would charge you but might be able to save you awful lot in taxes.

CassioAcc · Feb 22, 2009

omelette said:
Would we take the profits from the partnership and pay tax on that separate to our individual income tax or perhaps halve the profits from the partnership and each add that to our individual income tax?

The profits would be split between the partners depending on the partnership agreement and this would be added to your other (employment income). If however you were to make a loss in the early years (perhaps due to the investment) you may be able to offset these losses.

MyAccountantOnline · Feb 22, 2009

omelette said:
I am just starting up a partnership with my friend but we're a bit unsure what tax we will need to pay.

We both work full time at the moment and can't afford to quit our jobs yet so the partnership will be on top of our jobs for now.

We are planning on contacting hmrc but can anyone give me an idea what we would pay?

Would we take the profits from the partnership and pay tax on that separate to our individual income tax or perhaps halve the profits from the partnership and each add that to our individual income tax?

We are not planning on taking a wage from the partnership but i suppose this doesn't make any difference to what we are taxed.

Any help on this would be great.

Thanks,
Emily

Emily at this stage you would be really well advised to see an accountant - their will be lots of matters which you ought to be taking professional advice on at this time.

Once you've talked through the options you may even find a partnership isnt the best option for you.

You'll find most good accountants will give you a free intial consulation too.

Good luck with the new business

DIY Accounting · Feb 22, 2009

nasirs said:
Now the question is what tax band you are in, there is a possibility that you are under basic rate which is 21% for 2009/10 for income upto £37,400 from the employment and the partnership income could put you under higher rate which is 40%.

Income tax basic rate for 2009-10 is same as 2008-09, 20 per cent
Subject to confirmation in the budget which has been delayed this year until April

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