tax on partnership

willywonka1

Hy.
Two in partnership, £40,000 proffit, each partner takes out £20,000, how much tax to pay?

Two in partnership, £40,000 proffit, each partner takes out £10,000, how much tax to pay?

Two in partnership, £40,000 proffit, each partner takes out £0, how much tax to pay?
Merci

DE_612183

Do you "take out" profits from a partnership?

I thought it was just total profit ( income less expenses ) divided as per the agreement.

Then you just pay tax as per normal via self assessment.

uknick

The tax to pay will depend on each partner's total taxable income for the tax year.  Based on what you've written it's impossible to answer.

DullGreyGuy

willywonka1 said:

Hy.
Two in partnership, £40,000 proffit, each partner takes out £20,000, how much tax to pay?

Two in partnership, £40,000 proffit, each partner takes out £10,000, how much tax to pay?

Two in partnership, £40,000 proffit, each partner takes out £0, how much tax to pay?
Merci

Only the first is possible, a partnerships themselves don't pay income/corporation taxes, even if they are incorporated. Profits are distributed to the partners as per the partnership agreement and each are considered self employed and taxed accordingly on the profits they receive. 

willywonka1

DullGreyGuy said:

willywonka1 said:

Hy.
Two in partnership, £40,000 proffit, each partner takes out £20,000, how much tax to pay?

Two in partnership, £40,000 proffit, each partner takes out £10,000, how much tax to pay?

Two in partnership, £40,000 proffit, each partner takes out £0, how much tax to pay?
Merci

Only the first is possible, a partnerships themselves don't pay income/corporation taxes, even if they are incorporated. Profits are distributed to the partners as per the partnership agreement and each are considered self employed and taxed accordingly on the profits they receive. 

Hy,
Thank you all.
I dont understand this, as in a partnership, we could do 1, 2 and 3. Meaning we have the business account, and,

1,
We could take £20,000 out each, and leave nothing in the account.

2,
We could take £10,000 out each and leave £20,000 in the account.

3,
Take nothing out, and leave the £40,000 in the account.
Merci

willywonka1

DE_612183 said:

Do you "take out" profits from a partnership?

I thought it was just total profit ( income less expenses ) divided as per the agreement.

Then you just pay tax as per normal via self assessment.

Yes, as I said,

1,
We could take £20,000, drawings/profit out each, and leave nothing in the account.

2,
We could take £10,000, drawings/profit out each and leave £20,000 in the account.

3,
Take nothing out, and leave the £40,000 in the account.
Merci

willywonka1

uknick said:

The tax to pay will depend on each partner's total taxable income for the tax year.  Based on what you've written it's impossible to answer.

uknick said:

The tax to pay will depend on each partner's total taxable income for the tax year.  Based on what you've written it's impossible to answer.

uknick said:

The tax to pay will depend on each partner's total taxable income for the tax year.  Based on what you've written it's impossible to answer.

Just say the £40,000, £20,00 each, is our total income for the year.
Merci

DE_612183

willywonka1 said:

DE_612183 said:

Do you "take out" profits from a partnership?

I thought it was just total profit ( income less expenses ) divided as per the agreement.

Then you just pay tax as per normal via self assessment.

Yes, as I said,

1,
We could take £20,000, drawings/profit out each, and leave nothing in the account.

2,
We could take £10,000, drawings/profit out each and leave £20,000 in the account.

3,
Take nothing out, and leave the £40,000 in the account.
Merci

I think the thing is that even if you leave all the profits in the account - it still is counted as your income for the year.

DullGreyGuy

willywonka1 said:

DullGreyGuy said:

willywonka1 said:

Hy.
Two in partnership, £40,000 proffit, each partner takes out £20,000, how much tax to pay?

Two in partnership, £40,000 proffit, each partner takes out £10,000, how much tax to pay?

Two in partnership, £40,000 proffit, each partner takes out £0, how much tax to pay?
Merci

Only the first is possible, a partnerships themselves don't pay income/corporation taxes, even if they are incorporated. Profits are distributed to the partners as per the partnership agreement and each are considered self employed and taxed accordingly on the profits they receive. 

Hy,
Thank you all.
I dont understand this, as in a partnership, we could do 1, 2 and 3. Meaning we have the business account, and,

1,
We could take £20,000 out each, and leave nothing in the account.

2,
We could take £10,000 out each and leave £20,000 in the account.

3,
Take nothing out, and leave the £40,000 in the account.
Merci

But in all 3 cases when you fill in your tax return you have to state your share of the profit was £20,000 and thats what you will be taxed on. The fact you have left it in the partnership's bank account is irrelevant. 

willywonka1

Hy,
So, we each have too pay £1486, if all is 50/50?
£12570 x 2 = £25140, take that off £40,000 = £14,860, divide by 2 = £7430 - 80% = £1486?
Merci

uknick

Yes, if that's all the taxable income you have.