Accounts and tax for sole traders and partnerships
Running a business in your own name or as a partnership keeps things simple. We keep the accounts and tax simple too, and tell you when a change of structure would pay.
As a sole trader or partner, you pay income tax and National Insurance on your share of the profits through self assessment. A partnership also files its own partnership tax return each year.
We prepare your accounts and returns, keep you ready for Making Tax Digital for Income Tax, and look at your structure as you grow. For many growing businesses, a limited company becomes the better choice. We tell you when, and handle the move if it's right.
- 1We agree a fee
- 2We review your records, or keep them for you
- 3We prepare your accounts
- 4We work out the tax and look for savings
- 5We file your returns
- 6We review your structure each year
Who benefits, and how
Working in your own name or with partners keeps the paperwork light. Our job is to keep it that way, and to tell you when another structure would suit you better.
Sole traders
- Accounts and a self assessment return prepared and filed well before the 31 January deadline.
- Your income tax and Class 4 National Insurance worked out in advance, with payments on account explained, so 31 January and 31 July hold no surprises.
- Every allowable expense and capital allowance claimed, backed by records that stand up if HMRC asks.
- A clear answer on when Making Tax Digital for Income Tax applies to you, with the software set up in time.
Partners
- The partnership return prepared for your nominated partner, and each partner's share of the profit carried through to their own return.
- Profit shares, drawings and capital accounts kept clear, so every partner can see what is theirs.
- Advice when a partner joins, leaves or retires, including the tax effect on each of you.
- One firm looking after the partnership and the partners, so the figures always agree.
Growing firms thinking about the next step
- A yearly look at whether staying as you are, forming an LLP or becoming a limited company would suit you better.
- Your tax worked out both ways from your own figures, including the extra cost and admin of running a company.
- Help moving the business across if a change is right, including the tax on transferring its assets.
Choosing the right structure
Each structure has a different mix of tax, paperwork, privacy and personal risk. These are the four we compare most often.
Sole trader
You and the business are the same legal person.
- Suits
- Starting out, modest profits, and anyone who wants the least admin.
- Tax
- Income tax and Class 4 National Insurance on all the profit, whether or not you draw it, through your self assessment return.
- Watch out for
- You are personally liable for the business's debts. On the other hand, your accounts stay private.
Partnership
Two or more people in business together, sharing the profits.
- Suits
- Family businesses and firms where the owners share the work and the reward.
- Tax
- Each partner pays income tax and National Insurance on their share of the profit. The partnership also files its own return each year.
- Watch out for
- Partners are personally responsible for the firm's debts, so a written partnership agreement matters.
Limited liability partnership (LLP)
A partnership with limited liability, registered at Companies House.
- Suits
- Professional practices and other businesses that want partnership-style tax with protection for the members.
- Tax
- Generally taxed like a partnership: each member pays tax on their share of the profit through self assessment.
- Watch out for
- It needs at least two designated members at all times, and its accounts and confirmation statement are filed publicly at Companies House.
Limited company
A separate legal person that you own and run.
- Suits
- Profits you don't need to draw in full, and businesses that want investors or to share ownership with key people.
- Tax
- Corporation tax on the company's profits: 19% up to £50,000 and 25% above £250,000, with marginal relief in between. You pay personal tax on what you take out as salary or dividends.
- Watch out for
- More admin, public accounts, and a tax cost on taking money out. Whether it pays depends on your figures.
Corporation tax rates are those for the financial year starting 1 April 2026.
Taxed on the tax year, not your accounting year
Since 2024/25, sole traders and partners are taxed on the profit of the tax year itself, 6 April to 5 April, rather than on the accounts that ended during it. 2023/24 was the transition year. Any extra profit it brought into charge is spread over five tax years by default, from 2023/24 to 2027/28, unless you choose to bring more of it in sooner.
If your accounts run to 31 March or 5 April, nothing changes day to day. If they end on any other date, a tax year's profit is taken from two sets of accounts, and the second may not be finished by 31 January. The return then goes in with provisional figures that are corrected later. Moving your year end to 31 March avoids this, and we can tell you whether that suits your business.
When it makes sense to become a company
There is no single profit figure at which a company always comes out ahead. It depends on how much profit you make, how much of it you need to live on, your other income, and what the extra accounts, payroll and admin cost. We work out your tax both ways from your own figures, so you can decide on the numbers.
If a company is right, we handle the move. When a business is transferred to a company in exchange for shares, incorporation relief can defer capital gains tax on its assets. For transfers from 6 April 2026 the relief has to be claimed, rather than applying automatically.
- Profits well above what you draw to live on
- Plans to bring in investors or share ownership with key staff
- Customers or contracts that expect to deal with a company
- Personal risk you want to keep separate from the business
Making Tax Digital for Income Tax and partnerships
Sole traders with qualifying income over £50,000 have been in Making Tax Digital for Income Tax since 6 April 2026, and the threshold falls to £30,000 from April 2027 and £20,000 from April 2028. Qualifying income is your turnover from self-employment and any rental income, added together, before expenses.
Partnerships are not yet in Making Tax Digital for Income Tax, and HMRC has not set a date. Your share of a partnership's profit doesn't count towards your own qualifying income, but income from a business you run on your own account, or from letting property, does.
Questions we’re often asked
Do I need to register as self-employed?
You need to register for self assessment if your gross trading income is more than £1,000 in a tax year, which is the trading allowance. Tell HMRC by 5 October after the end of the tax year in which you started. Below £1,000 you generally don't need to tell HMRC, but you should still keep records.
Do I still pay Class 2 National Insurance?
Not if your profits are £7,105 or more in 2026/27. Since April 2024, Class 2 is treated as paid at that level, so your State Pension record is protected without a payment. Below it, you can choose to pay voluntarily at £3.65 a week. Class 4 is 6% on profits between £12,570 and £50,270, and 2% above that.
What are payments on account?
Unless last year's self assessment bill was under £1,000, or more than 80% of your tax was collected at source, you pay towards this year's bill in advance: half of last year's tax by 31 January and half by 31 July, with any balance due the following 31 January. We tell you the amounts in good time, and whether they can be reduced if your profits fall.
Can partners share profits unequally?
Yes. Your partnership agreement sets how profits are shared, and the partnership return shows each partner's share. Each partner then pays tax on their own share. We help you set a split that reflects what each partner puts in.
Rules and limits checked 9 October 2026.
Talk to us about your tax.
A free call with the team. We’ll contact you within 24 hours.