Hello there! I\u2019m your friendly neighborhood Chartered Accountant, and today we are diving into one of my favorite “hybrid” business structures: the Limited Liability Partnership (LLP)<\/b>.<\/p>\n
If a traditional partnership and a limited company had a baby, it would be an LLP. It\u2019s got the “cool, flexible” vibe of a partnership but wears the “protective armor” of a limited company. Whether you’re a pair of architects, consultants, or even tech wizards, the LLP is a fantastic way to collaborate without betting your house on your partner’s decisions.<\/p>\n
Let\u2019s break down how to get this show on the road for the 2025\/26<\/b> and 2026\/27<\/b> tax years.<\/p>\n
\nWhat Exactly is an LLP?<\/h2>\n
In a traditional partnership, if your partner accidentally buys 10,000 unicycles the business can’t afford, the creditors could come for your<\/i> personal car. Yikes.<\/p>\n
In an LLP<\/b>, the entity is a “body corporate”. It can own property, sign contracts, and\u2014most importantly\u2014it has its own debts. Your liability is generally limited to what you\u2019ve invested in the business.<\/p>\nThe Essential Checklist<\/h3>\n
To start an LLP, you need:<\/p>\n
At least two members:<\/b> These can be humans or even other companies.<\/p>\n<\/li>\n Two “Designated Members”:<\/b> Think of these as the “responsible adults” who handle the paperwork with Companies House.<\/p>\n<\/li>\n An LLP Agreement:<\/b> While not legally required to be filed, do not skip this<\/b>. It\u2019s the “prenup” for your business, deciding how profits are split and what happens if someone wants to leave.<\/p>\n<\/li>\n<\/ul>\n You don’t just high-five and become an LLP; you have to register with Companies House<\/b>.<\/p>\n Choose a Name:<\/b> It must end in “Limited Liability Partnership” or “LLP”.<\/p>\n<\/li>\n Registered Office:<\/b> You need a physical UK address where HMRC and Companies House can send you “love letters” (official notices).<\/p>\n<\/li>\n Registration:<\/b> You can do this online (usually ~\u00a350) or by post.<\/p>\n<\/li>\n Identity Verification:<\/b> New for 2026!<\/b> Starting in late 2025 and moving into 2026, all members must verify their identity with Companies House to prove they are who they say they are.<\/p>\n<\/li>\n<\/ol>\n Here is the “fun” part (okay, maybe just fun for accountants). LLPs are tax-transparent<\/b>. This means the LLP itself doesn’t pay Corporation Tax. Instead, the profits “flow through” to the partners, who pay Income Tax and National Insurance (NI) on their share.<\/p>\n As a partner, you are treated as self-employed. You\u2019ll need to file a Self Assessment<\/b> return every year.<\/p>\n Accountant’s Tip:<\/b> If you’re in Scotland, the rates are different! For 2026\/27, Scotland is seeing some threshold increases, but higher earners still pay significantly more than the rest of the UK.<\/p>\n<\/blockquote>\n For 2025\/26, the self-employed NI landscape is simpler than it used to be. You\u2019ll primarily focus on Class 4 NI<\/b>, which is 6% on profits between \u00a312,570 and \u00a350,270, and 2% on anything above that.<\/p>\n Being a “Designated Member” comes with a bit of homework. You must:<\/p>\n File Annual Accounts:<\/b> Even if you aren’t making millions yet.<\/p>\n<\/li>\n Confirmation Statement:<\/b> An annual “yep, we’re still here and these are our details” update to Companies House.<\/p>\n<\/li>\n VAT Registration:<\/b> If your turnover hits \u00a390,000<\/b>, you must register for VAT.<\/p>\n<\/li>\n Making Tax Digital (MTD):<\/b> If you are a partner with qualifying income over \u00a320,000, keep an eye on April 2026\/2027<\/b>. MTD for Income Tax is rolling out, requiring you to keep digital records and send quarterly updates to HMRC.<\/p>\n<\/li>\n<\/ul>\n Protection:<\/b> Your personal assets are generally safe.<\/p>\n<\/li>\n Flexibility:<\/b> You can change profit-sharing ratios every year if you want to.<\/p>\n<\/li>\n Credibility:<\/b> Having “LLP” at the end of your name looks professional to clients.<\/p>\n<\/li>\n<\/ul>\n Publicity:<\/b> Your accounts and member names are public on the Companies House website.<\/p>\n<\/li>\n Tax Timing:<\/b> You pay tax on profits as they are earned, even if you leave the money in the business to buy new equipment later.<\/p>\n<\/li>\n<\/ul>\n
\nSetting It Up: The Logistics<\/h2>\n
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\nThe Tax Man Cometh: HMRC & The LLP<\/h2>\n
Tax Rates for 2025\/26 and 2026\/27<\/h3>\n
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\n Tax Band<\/strong><\/td>\n 2025\/26 Threshold<\/strong><\/td>\n 2026\/27 Threshold (Rest of UK)<\/strong><\/td>\n Rate<\/strong><\/td>\n<\/tr>\n<\/thead>\n\n \n Personal Allowance<\/b><\/span><\/td>\n \u00a312,570<\/span><\/td>\n \u00a312,570<\/span><\/td>\n 0%<\/span><\/td>\n<\/tr>\n \n Basic Rate<\/b><\/span><\/td>\n Up to \u00a337,700<\/span><\/td>\n Up to \u00a337,700<\/span><\/td>\n 20%<\/span><\/td>\n<\/tr>\n \n Higher Rate<\/b><\/span><\/td>\n \u00a337,701 \u2013 \u00a3125,140<\/span><\/td>\n \u00a337,701 \u2013 \u00a3125,140<\/span><\/td>\n 40%<\/span><\/td>\n<\/tr>\n \n Additional Rate<\/b><\/span><\/td>\n Over \u00a3125,140<\/span><\/td>\n Over \u00a3125,140<\/span><\/td>\n 45%<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n \n
National Insurance (NI)<\/h3>\n
\nRunning the Show: Ongoing Compliance<\/h2>\n
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\nIs an LLP Right for You?<\/h2>\n
The Pros<\/h3>\n
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The Cons<\/h3>\n
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Useful Links for Your Journey:<\/h3>\n