With the November Budget two weeks away, one rumour appears to be gaining a lot of traction.
Media reports suggest that the Chancellor, Rachel Reeves, may introduce a new National Insurance Contribution (NIC) charge on partnerships.
What is being considered?
It is understood that the Government is exploring the idea of applying an employer-style NIC charge to partnership profits.
This follows a paper published by the CenTax think-tank, which recommended the Government equalise the employer NIC treatment of partners with employees.
Currently, partners are treated as self-employed, so the employers NIC charge, which was increased to 15 per cent in April 2025, does not apply to their earnings.
If the change mirrors the employer rate, it could amount to an effective tax rise of about seven per cent for higher rate taxpayers in a partnership.
It is not yet known whether the charge would apply only to limited liability partnerships (LLPs) or to all partnerships.
What are the possible implications?
LLPs are widely used across professional and private capital sectors. Any additional charge would increase costs and may encourage firms to reconsider their structures.
Partnerships outside financial services, including medical and agricultural practices, could also be affected. However, there are further rumours that suggest Rachel Reeves could introduce an exemption for medical professionals.
A full consultation would be expected to help firms prepare, so if partnership NICs are introduced, it is unlikely to start before April 2026.
What should you do?
Given the potential impact, it may be that partnerships should look to review their current structure and model possible outcomes after the Budget.
Contact us to prepare your firm for the best possible response if new charges are confirmed.
