Budget '24: LLP members spared as national insurance 'loophole' remains

Members of limited liability partnerships appear to have escaped the chancellor of the exchequer’s raid on employers’ national insurance contributions in this week’s budget. While the government increased the rate of employer contributions by 1.2 percentage points to 15% from 6 April, it made no announcement about extending employer liability to LLP member drawings. 

Most LLP members are treated as self-employed for national insurance purposes and pay the lower Class 4 rate.  There had been speculation that the chancellor would target LLP members, which could potentially have been very costly. Analysis in the latest issue of magazine Private Eye calculates that the apparent loophole costs £138,000 on every £1m of profit shared - and that £4bn extra could be raised from the magic circle alone (excluding traditional partnership Slaughter and May). 

Experts suggested that the chancellor could revisit LLPs as the squeeze on public finances continues. Peter Noyce, a partner specialising in the legal sector at accountancy firm Menzies, said he would not be surprised if HM Revenue & Customs began examining ‘salaried member’ structures more closely.

‘This shift could broaden the scope of affected members and lead to an increase in employer national insurance contributions,’ Noyce said.

The general increase in employers’ national insurance will be a hit to most law firms, he added. ‘Smaller practices will be shielded to some extent by the increased employer allowance. That said, how this will manifest in potentially lower future salary increases, and then hiring and retention decisions, will be interesting. Firms will be remodelling 2025 budgets given this increased cost base.’

In another budget announcement, the government said it will publish a consultation in early 2025 on ‘a package of measures to tackle promoters of marketed tax avoidance’.