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TaxRobin
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Experience:  International tax
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Why do I have to pay tax on business profits and tax on partnership

Resolved Question:

Why do I have to pay tax on business profits and tax on partnership share?
Submitted: 1 year ago.
Category: Tax
Expert:  TaxRobin replied 1 year ago.
HelloAll businesses in UK become liable to pay either Income tax or Corporation tax on their net profits. If the business entity is a sole proprietorship or partnership, the net profits become part of the entrepreneur's taxable personal income and attract income tax. As a partner in a business you are taxed on your share of the partnership profits for the tax year, similar to the way a self-employed individual is taxed. The taxable profits of the partnership is based on the the profit and loss account figures. The income will be liable to tax at your marginal rate.It can be a little confusing but I hope the following can simplify the accounting some for you.The general rule is that the tax for a particular tax year is based on the profits of the twelve months to your accounting date in that tax year. In the first tax year of your business, the tax payable is based on the profit arising between the starting date (or the date you joined the partnership) and the following 5 April. Each partner is then allocated his share of the amounts taxable on the partnership for the two years. The profit from 1 July 2014 to 5 April 2015 (9 months) has been taxed twice on each partner. The ‘overlap’ profit is however available for deduction when the partnership comes to an end, or one of the partners leaves the firm.Your accountant should be able to explain your specific situation and numbers.
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