Reeves’ LLP tax proposal will undermine ‘cornerstone of UK economy’
A professional services trade body warned that Rachel Reeves’ proposed increase in NICs for LLPs could lead to widespread conversion to limited company structures, undermining a successful British business model.
The limited liability partnership (LLP) model, in which members (known as partners) invest their own capital in the business, was introduced 25 years ago and has since become a popular model for the professional services sector.
Yet the Chancellor, as she tries to fill the fiscal black hole, is reportedly looking to target LLPs for a tax raid by levying a ‘partnership NIC’, which is estimated to raise £1.9bn in 2026-27.
However, the Association of Partnership Practitioners (APP) has warned against this change, stating that it will yield only a minor or even reduced tax revenue for the government, as the sector will undergo a structural shift to a limited liability company.
APP highlighted that partnership models, including LLPs, “are the cornerstone of the UK economy”, as they cross high-value sectors such as legal, accounting, and asset management, and contribute significantly to GDP and employment across the UK.
The total tax contribution of the financial and related professional services industry was £110.2bn in 2023, while employment taxes for the financial and related professional services industry alone totalled £55.1bn.
Calls for consultation on rumoured LLP reform
If Reeves green-lights this move in her Autumn Budget, the APP has called for a consultation.
The body said that, as there has been no consultation yet on this rumoured proposal, any reform needs to be “carefully considered because of the widespread detrimental effect it might have on those sectors and economic growth generally.”
Jonathan Gavaghan, chair of the APP, stated: “The committee of the APP calls on the government not to bring in tax reforms to NIC affecting partnerships or LLPs without first engaging in meaningful consultation with stakeholders and considering alternative approaches that preserve the benefits of partnership and LLPs while achieving fiscal goals.”
This comes as the legal industry has already slammed the rumoured move, with the Law Society calling the move one that “could harm one of the UK’s most globally competitive sectors.”
Law Society vice president Brett Dixon stated: “Adding further burdens now risks creating a perfect storm that limits firms’ ability to invest, hire, and contribute to growth, which could prove damaging to the wider economy.”