Tax Hike on LLPs May Drive White Collar Professionals Abroad

James Libson, managing partner of the prominent law firm Mishcon de Reya, has issued a stern warning about the proposed tax rises on limited liability partnerships LLPs set to be unveiled in Rachel Reeves’s upcoming budget. The proposed higher taxes could prompt a flight of highly skilled professionals from the UK Libson argues, with implications extending far beyond the affluent postcodes of London and the southeast.

Initial concerns in the City suggest sweeping changes that might leave partners in professional services firms with substantially larger tax bills amounting to thousands of pounds annually. Libson asserts that such measures would be both dangerous and potentially destructive. He maintains that most LLP partners, far from being millionaires, are middle and upper middle income earners facing additional pressures such as increasing independent school fees. The suggestion is that punitive taxation could diminish the UK’s attractiveness, sending lawyers and accountants to more welcoming jurisdictions.

Although the Treasury has avoided confirming or denying the rumoured clampdown on LLPs, reports indicate an increase in tax remains probable. Exemptions for lower earning partners are reportedly under consideration but specifics are yet to be disclosed. The LLP structure, introduced in 2001 and used by more than fifty thousand entities according to Companies House, provides tax advantages by treating partners as selfemployed for tax purposes. This exempts them from employers’ national insurance contributions, except where salaried partners without equity are concerned.

Critics often highlight the substantial income some LLP members enjoy, with data from the London School of Economics revealing that the top 01 per cent of taxpayers earned nearly half of all partnership income in 2020. Introducing employerstyle national insurance contributions could net the Treasury up to £1 point 9 billion annually.

Libson contends that while the principle of a fair burden of tax is sound, equating entrepreneurial partners who own and invest in LLPs with regular employees is misguided. He emphasises that these individuals take on risk and invest their own capital and that the current tax treatment supports business innovation and investment.

Mishcon de Reya’s recent expansion into the United Arab Emirates exemplifies the global opportunities beckoning UKbased professional firms. Libson’s comments reflect a wider concern about London’s diminishing appeal relative to emerging financial capitals worldwide, as Britain’s uncertain economic outlook and expectation of rising taxes drive both firms and wealthy individuals to look abroad. The leadership at Mishcon de Reya underscores that while the UK retains worldclass talent and a celebrated capital city, strategic missteps in tax policy could have lasting repercussions on its professional landscape.