Can anyone help with tax payable by a partnership of two?

scribekate2

Hi
I run a very small business as a Sole Trader. At the moment I'm not taxed on my earnings as they're under the £10,000 personal allowance. If my husband helped, we might be able to make about £20,000 pa. (I know it's not a lot in the grand sceme of things, but it's the best we can do)

Does anyone know, if my husband joined me and took an active role in the business, could he say he was a Sole Trader too (even though working under the same banner as me), and would he still be entitled to his £10,000 personal allowance? Or would we have to declare ourselves a partnership, and the £20,000 profit be taxed at the usual rate, which I think is about 25%? (If we are each allowed to earn £10,000 before tax, we could just about scrape by. But if not...)

I'd appreciate any help from anyone who might know about these things. Thanks

SeduLOUs

I understood that as a partnership you still complete the usual individual tax returns and still get your allowances, but there are some extra bits of paper to complete to show how your profit share is made up.

Not sure where you've got the 25% idea from?

scribekate2

Thanks, Sedulous – only hearsay on the 25% Someone once told me that as a rough guide, tax and NI take about 25% of whatever we earn (obviously that's the lowest rate for someone not earning a great deal). I've no idea how accurate that is. Thanks for the information on partnership/sole trading.

SeduLOUs

I don't know an awful lot about it but HMRC would be a good place to start.

http://www.hmrc.gov.uk/sa/parts-partners.htm

Auntie-Dolly

Yes, you can be an informal partnership and split the profits of the business in the most tax efficient way. You will need to register the partnership with HMRC and complete an SA800 annually which shows the partnership figures. You then complete individual tax returns showing your share of the profit.

scribekate2

Thanks Auntie Dolly and Sedulous – all very helpful. Gives me a good place to start.