This guidance note sets out the income tax and corporation tax implications of a partner leaving the partnership including the utilisation of losses.

Following the abolition of basis periods from 2024/25 for sole traders and partners in partnerships, meaning that profits and losses are assessed on a tax year basis from 2024/25 onwards, the closing year rules in this guidance note are only applicable for a partner ceasing their notional trade in the tax years up to 2023/24. For details of the tax year basis see the Tax year basis from 2024/25 onwards guidance note.

For the position when a new partner joins the partnership, see the Admitting a new partner guidance note. A partner joining or leaving a firm can also have an effect on the capital allowances or capital gains position, see further the Capital allowances for partnership changes and the Capital gains of a partnership guidance notes.

For the rules which apply when the partners stay the same, but there is a change in the profit sharing ratios, see the Allocation