How much tax for partnership?

[VespertineStar]

I was wondering how much tax, percentage-wise a partnership would have to pay with the following details and also what would we be taxed on turnover or profit?

Turnover: £5000 PM
Stock: £2000 PM
Wages: £1500 PM
Other Costs e.g. shipping: £500 PM

So after all is said and done we would be left with about £1000 a month profit.

So would we pay tax on the £1000 or the £5000?

[James Smith]

You are taxed on your profits.

The amount of tax you pay (as a partnership) will depend entirely on your other incomes. If you have no other incomes the first £6.5k (ish) is tax free, then you pay (including national insurance) 28% of your income for the next £37.4k and then 41% above that.

[accountantpete]

NB - the "wages" shouldn't include payments to any of the partners.These are classed as drawings and are not an allowable business expense in computing profits.

[VespertineStar]

Ahhh I see, so basically it would be 28% of everything including the drawings from the business. So would the drawings' tax be calculated for each of the partners for them to pay or would it be made as one payment with the rest of the profit from the business?

[accountantpete]

Ahhh I see, so basically it would be 28% of everything including the drawings from the business. So would the drawings' tax be calculated for each of the partners for them to pay or would it be made as one payment with the rest of the profit from the business?

Before I go any further VS you really need to see an accountant asap and ask him for advice and get a partnership agreement drawn up.

The answer is basically the latter. HMRC taxes the partnership as a whole- it is up to the partners to agree their share of the bill and how it is paid. It can get very complex if partners have differing tax situations and differing levels of drawings - hence my advice to consult an accountant.

[VespertineStar]

Righty O thanks for the advice guys I'll go see what other info I can dig up on the subject and then go see an accountant.