A partnership is a type of business owned and run by multiple people, called partners.
Partnerships and limited companies file different kind of tax returns:
- limited companies need to file Annual Accounts with the Companies House
- they also have to file a company tax return with HMRC
- partnerships file only a partnership tax return with HMRC
- and their partners also have to file individual Self Assessment tax return with HMRC.
Partners and directors of limited companies also earn money and pay taxes differently:
- in limited companies, directors can pay themselves a salary (taxed via PAYE) and, after the company pays corporation tax, directors can also pay themselves dividends (taxed through Self Assessment)
- in partnerships, the partners divide the profit between themselves, according to their share – each will then pay Income Tax and National Insurance through a Self Assessment tax return.