Glossary · UK
What is LLP Partner Income?
Profits allocated to a Limited Liability Partnership member, which are taxed as self-employment income and reported via Self Assessment rather than as a salary.
Full Definition
A Limited Liability Partnership (LLP) is a business structure available in England, Wales, Scotland and Northern Ireland under the Limited Liability Partnerships Act 2000. For UK tax purposes, LLP members (partners) are treated as self-employed, not employees. Each member's allocated share of the LLP's profits is treated as self-employment income, subject to Income Tax and Class 4 National Insurance Contributions (NICs) via the Self Assessment return -- not PAYE. Class 2 NICs (£3.45/week in 2024/25) are also payable if profits exceed the Small Profits Threshold, though Class 2 is being progressively reformed. Because LLP members are self-employed, they can also make pension contributions and claim the pension tax relief, and can deduct allowable business expenses from their profit share. One important anti-avoidance rule affects LLPs with a mix of individual and corporate members: HMRC's "salaried member" rules (introduced 2014) can recharacterise an individual member as an employee for tax purposes if they meet certain conditions around disguised salary, significant influence and capital contribution. If reclassified as a salaried member, their income is subject to PAYE and employer NICs, which can be significantly more expensive for the LLP. Professional service firms (law, accountancy, property) commonly use LLP structures, and members should take specialist advice to ensure their membership arrangements are tax-efficient and compliant.