Partnerships: Reeves To Go on Tax Hunt
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- Published: Wednesday, 22 October 2025 09:48
- Written by News Editor
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Chancellor Rachel Reeves is expected to announce a new £2 billion tax measure targeting self employed, high-earning, professionals in partnership accounting structures, including those operating through limited liability partnerships (LLPs). The reform aims to narrow the tax gap between self-employed partners and employed professionals, including those in dentistry who operate under partnership structures.
The reform, expected to be confirmed in the forthcoming Budget, will affect those in sectors such as law, accountancy, medicine — and potentially dentistry — where partnership models are commonly used.
At present, professional partners are treated as self-employed for tax purposes. This means that they are not liable for employer National Insurance contributions (NICs), which currently stand at 15%, and pay lower employee NICs compared to standard employees. The Treasury believes this system provides an unfair tax advantage over salaried employment, and intends to “equalise” tax treatment by imposing a new levy on partnership income at a rate slightly below the current employer NIC rate.
The change is expected to raise around £2 billion annually and will contribute to closing what the Treasury describes as a £30 billion gap in the public finances. Reeves has repeatedly stated that “those with the broadest shoulders should pay their fair share of tax,” signalling a clear intent to target the highest-earning professionals.
According to analysis by the Centre for the Analysis of Taxation (CenTax), more than 190,000 individuals work within LLPs, including over 13,000 partners earning an average of £1.25 million per year. On average, solicitors receive £316,000 annually in partnership profits, accountants £246,000, and family doctors £118,000. Although dentistry has a smaller proportion of practitioners using LLP structures, the sector could still be indirectly affected, particularly among larger multi-site practices or corporate groups operating in partnership form.
Arun Advani, Director of CenTax, said the absence of employer NICs for partners was “an historical anomaly” rather than a deliberate policy decision, describing it as a regressive feature of the current system. “There is no reason partners should pay less tax than similarly highly paid employees and business owners,” he noted.
However, some economists have cautioned that higher taxation on professional partnerships could have unintended consequences. Stuart Adam, Senior Economist at the Institute for Fiscal Studies (IFS), warned that while many LLP partners are “effectively employees in all but name,” such measures could deter professional investment or even drive talent overseas.
The policy forms part of a wider review of how different forms of employment and self-employment are taxed, an area long regarded as inconsistent and overly complex.
For dental professionals, especially those involved in partnerships or hybrid ownership models, the announcement signals a potential increase in overall tax liability and a reduction in the fiscal advantage of partnership status. Practices may wish to seek early financial and legal advice to understand how the forthcoming changes could impact profitability, partner drawings, and long-term planning.
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