How are profits from a Limited Liability Partnership taxed in the UK?

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**What is an LLP?** A Limited Liability Partnership (LLP) is a hybrid business structure: it has legal personality like a limited company but is taxed like a traditional partnership. LLPs are common in professional services (law firms, accountancy practices, consultancies). **No corporation tax on the LLP** Unlike a limited company, an LLP does not pay corporation tax on its profits. Profits "flow through" to the members and are taxed at the individual level. **How members are taxed** Each member is treated as self-employed and pays: - **Income tax** on their profit share via Self Assessment - **Class 4 NI**: 6% on profits between £12,570–£50,270; 2% above £50,270 (2026/27 estimated) - **Class 2 NI**: £3.45/week (2026/27 estimated) if profits exceed the small profits threshold (~£12,570) **Example: Emma and James, LLP members** Their LLP makes £200,000 profit, split 60:40. Emma's share: £120,000 - Personal allowance: £12,570 - Basic rate (to £50,270): £37,700 × 20% = £7,540 - Higher rate (to £125,140): £69,730 × 40% = £27,892 - Income above £125,140: £(120,000 − 125,140 = £0 — just under) - Class 4 NI: 6% × (£50,270 − £12,570) + 2% × (£120,000 − £50,270) = £2,262 + £1,395 = £3,657 **Salaried member rules** HMRC introduced rules in 2014 to prevent disguised employment. If an LLP member is in substance an employee (fixed salary regardless of profit, little influence over affairs, no capital at risk), they may be reclassified as an employee — subjecting their pay to PAYE and employer NI. **LLP vs. limited company** For higher earners, a limited company with salary + dividends can be more tax-efficient than an LLP at high profit levels due to lower dividend tax rates vs. income tax. However, LLPs offer simpler profit extraction, no legal requirement to retain earnings, and less administrative burden.

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• How are profits from a Limited Liability Partnership taxed in the UK?