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I’m a partner in a City law firm – what could the LLP reforms mean for me?

If you’re a partner in a City law firm, you won’t have missed the growing noise around the government’s review of Limited Liability Partnerships. The headlines have been clear: the Treasury is considering making firms pay employer National Insurance on partner profits – a move that could reshape how professional partnerships operate.

It’s early days, but the direction of travel matters. LLPs have long been treated differently to limited companies, and those differences – particularly around National Insurance – are now under scrutiny.

Here’s what’s being discussed, and what it could mean for you and your firm.

What’s actually on the table

At present, partners in LLPs are treated as self-employed. You pay income tax and Class 4 National Insurance on your share of profits, while the firm pays no “employer” National Insurance at all. Under the reforms being explored, that could change. The government is weighing up a new “partnership NIC”, which would effectively apply an employer-style charge at the current employer National Insurance rate of 15% on profits allocated to partners.

What this could mean for you

1. Lower take-home income

If a partnership NIC is introduced, firms will have to decide who shoulders the cost – the business, the partners, or a mix of both. Either way, partners can expect a hit to their net income.

That means revisiting:

  • Cash flow and short-term savings targets
  • Pension funding and annual allowance planning
  • Tax reserves and timing of drawings

2. Firm-level questions

For managing and senior partners, this raises strategic questions too.

  • Does the LLP structure still make sense if the tax benefit narrows?
  • Should the firm consider incorporation, hybrid models or revised remuneration structures?
  • How will this affect the appeal of partnership for the next generation of lawyers?

Firms that start running the numbers early will be in a stronger position if reforms are confirmed.

3. Personal financial planning

For individual partners, this is a reminder that structure and timing matter. If take-home income changes, so does your broader financial plan – from retirement projections to mortgage decisions and investment contributions.

Getting ahead of this means stress-testing your plan now:

  • How would a potential reduction in post-tax income (for example, 5–10%) affect your goals?
  • Are there efficiencies elsewhere – in pension planning, wrappers or income sequencing – that could offset it?
  • If your firm does restructure, what are the tax implications of any change in your status?

What happens next

This is still a proposal, not policy. But the fact it’s being seriously discussed – and could raise billions in extra revenue – means it’s unlikely to disappear quietly. The legal profession, along with accountancy and consulting, is squarely in the spotlight.

Whether reforms arrive next year or further down the line, it makes sense to prepare as if they will.

Porta’s take

If you’re a partner in a City law firm, these reforms are more than a technical tax tweak – they could reshape how you’re paid, how your firm operates, and how you plan for your own future. You can’t control the legislation, but you can control how ready you are for it. Start with clarity: understand what’s being proposed, model the possible outcomes, and make sure your personal and professional plans can adapt.

Change at this level can feel unsettling, but with a clear strategy – for both the firm and the individual – it doesn’t have to catch you off guard.

Important information: This article provides general information only and does not constitute personal financial advice. The information is based on our understanding of current regulations, which may change in future. Decisions about your finances should always be made based on your individual circumstances. If you’re unsure about the suitability of any course of action, you should seek regulated financial advice. The Financial Conduct Authority does not regulate tax planning, estate planning, or business structuring.

The value of your investments can go down as well as up, so you could get back less than you invested.

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Got a question or want to chat about your plans? Fill in the contact form below or drop us an email – whichever you prefer.

You voluntarily choose to provide personal details to us via this website. Personal information will be treated as confidential by us and held in accordance with the Data Protection Act 2018. You agree that such personal information may be used to provide you with details of services and products in writing, by email or by telephone.