As Rachel Reeves prepares to unveil the Autumn Budget on 26 November 2025, the latest press reports suggest the Government will look to introduce a new charge on individuals who use limited liability partnerships (“LLPs”).
The proposed change recommended by the Centre for the Analysis of Taxation (“CenTax”) is to extend employer rates (15%) of National Insurance Contributions (“NICs”) to LLP members. This move is expected to have a substantial impact across sectors where LLPs are commonly used, including legal, medical, consultancy, and asset management.
This is of particular note as sections of CenTax reports for tax changes to non-domiciles were adopted in last year’s Budget, suggesting the Treasury may hold their reports in high regard. Furthermore, it is estimated it could generate £2 billion annually and close what is seen by some as a long-standing tax advantage.
Why LLPs Are Under the Spotlight
LLPs have long offered a hybrid structure: the legal protections of a company with the tax flexibility of a partnership. Members are typically treated as self-employed, meaning:
- No employer NICs are paid.
- Members benefit from lower NIC rates than employees.
What’s being proposed?
The proposed changes is to introduce employer NICs at 15% on LLP member’s profit allocations, in addition to the Class 4 and 2 NIC already liable.
It is believed the change will only apply to LLPs therefore excluding general partnerships.
Legal firms
According to the CenTax, solicitors alone account for 20% of all partnership income.
The Law Society has warned that the reform would be a “big hit” on the legal profession and have provided the following example that a solicitor earning £316,000 could see their take-home pay fall by £23,000.
Medical sector
While initial reports suggested a “tax raid on GPs,” it’s been confirmed that NHS GPs are not allowed to operate as an LLP under the terms of their contracts. However, if the reform extends to all partnerships, it could affect 96% of GP practices, which could prompt early retirements and reduce the appeal of the partnership model for younger GPs.
What’s next?
While this continues to be speculation, the previous promises to not raise headline taxes suggests this could be likely. The Autumn Budget is expected to confirm:
- Whether the change will actually be introduced
- If it would apply to LLPs only or all partnerships.
- The implementation timeline, likely from April 2026.
- Any exemptions or thresholds for smaller firms.
The proposed LLP reforms represent one of the most significant tax shifts for partnerships in over a decade. If introduced, this reform could reshape the financial landscape for LLPs and their members. Those operating in partnership, particularly in an LLP should pay close attention come Budget Day and may wish to start considering how the proposed NIC changes would affect them and their business.
If you have any questions regarding any of the above, please get in touch with your usual PEM adviser or contact us here.
Please note that this content is not intended to give specific technical advice. It is designed to highlight some of the key issues rather than provide an exhaustive explanation of the topics. Professional advice should always be sought before action is either taken or refrained from as a result of information contained herein.
