LLPs in the Spotlight: What the Rumoured Tax Changes Could Mean for Professional Firms
As speculation builds ahead of the Autumn Budget on 26 November 2025, one of the most talked-about possibilities is a significant change to how Limited Liability Partnerships (LLPs) are taxed.
Reports suggest that Chancellor Rachel Reeves is considering bringing LLPs into the scope of employer’s National Insurance contributions (NICs) for the first time — a move that could have major implications for professional service firms across the UK.
What is an LLP?
A Limited Liability Partnership is a common business structure used by professional firms such as accountants, solicitors, architects, engineers, and consultants.
It combines the flexibility of a traditional partnership with the legal protection of limited liability — meaning each partner’s personal assets are protected, but the firm can still distribute profits in a tax-efficient way.
Currently, LLP members are treated as self-employed for tax purposes. This means:
LLPs don’t pay employer’s NICs on members’ earnings.
Partners are responsible for paying their own income tax and Class 2/4 NICs through self-assessment.
This arrangement has made the LLP model attractive for firms seeking flexibility and efficiency — but it may soon face reform.
What’s Being Rumoured
According to several reports, the Government is considering aligning LLPs more closely with traditional employment structures. The proposed reform would mean that:
LLPs could become liable for employer’s National Insurance (currently 13.8%) on partners’ earnings.
The distinction between employees and LLP members may be narrowed, especially where members have roles similar to salaried employees.
Professional partnerships with high earnings could face significantly higher costs, depending on how the rules are implemented.
If enacted, this would mark the biggest change to LLP taxation in decades, impacting thousands of firms that currently operate under partnership models.
Why This Matters for Professional Firms
For industries built around partnership structures — including accountancy, law, and architecture — these potential changes could reshape how firms plan, pay, and distribute income.
Key areas of impact could include:
Increased cost base: Employer’s NICs on partner drawings would add a new layer of cost, reducing available profit.
Restructuring considerations: Firms may need to revisit whether their existing LLP setup remains the most efficient model.
Cashflow pressures: Additional liabilities could affect quarterly and annual financial planning.
Talent retention: Adjustments to partner remuneration may be needed to offset higher tax burdens.
While nothing is confirmed yet, early preparation will be essential if these reforms appear in the Autumn Budget.
How Exchange Can Help
At Exchange Accountants, we’re closely monitoring the evolving discussion around LLP taxation and employer’s NICs.
Our team can:
- Review your current LLP structure and identify potential vulnerabilities.
- Model the financial impact of possible changes.
- Advise on alternative structures or remuneration models.
- Ensure your firm remains compliant and competitive in a shifting tax landscape.
Stay Ahead of the Curve
The Autumn Budget could introduce a major shift in how partnerships operate. Being proactive now means you won’t be caught off guard later.
