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Allocation of profits between partners

B7.501 Common partnership profit sharing arrangements

As partnerships are transparent for tax purposes, each partner (corporate or non-corporate) in a partnership is assessed to tax on their share of the partnership profits or gains. This share is determined according to the partnership profit sharing arrangements for that period¹.

This means that a body of persons carrying on a trade in partnership is not, for tax purposes, treated as an entity separate from the partners².

For individuals in a trading partnership or one with untaxed income, prior to the basis period reforms, each partner was treated as carrying on a notional trade or business in respect of their share of that partnership so that the basis period opening and closing rules applied³. Following the basis period reforms for the 2024/25 tax year onwards the basis period rules will not apply, and an individual partner will instead be taxed on the profits arising in the