U.K. Professional Clients
U.K. Private Customers
Partners are considered as self-employed for tax purposes. Partnerships do not pay corporation tax. Because of this, you will be responsible for your own tax and National Insurance and will therefore be required to register with the Inland Revenue. You are required to register with the Inland Revenue as self-employed within 3 months of starting a new business. Failure to do so may make you liable to pay £100.00. If you do not register and are not paying tax, you will breaking the law and could be liable to further penalties.
Registration is achieved by completing and sending to the IR form CWF1. This form registers you for paying flat rate Class 2 National Insurance contributions. The weekly flat rate is £2.40 p.w. You should fill in the Class 2 contributions Direct Debit application form. In the April after your business starts (financial year is from 6th April to the following 5th April) the Inland Revenue will send you a self-assessment tax return to fill in.
This will be used to assess any profit -related Class 4 NI contributions that you may need to pay. After your first year in business, the IR will ask you to make "payments on account" - to pay most of your income tax and some of your Class 4 NI contributions in advance. The amount requested is based on the prior year's earnings with payments due on 31st January and 31st July. If your profits are down you can request to reduce these payments.