How to Handle Corporation Tax for a Partnership or LLP

When it comes to UK business structures, understanding how taxes apply can be confusing especially for partnerships and Limited Liability Partnerships (LLPs). While limited companies are subject to corporation tax, traditional partnerships are not. However, LLPs have more complex treatment and can sometimes fall within the corporation tax regime depending on how they operate.

In this post, we look at the essentials of how to handle corporation tax for a partnership or LLP in the UK, including the latest updates for the 2025/26 tax year. Whether you’re starting out or looking to ensure compliance, here’s what you need to know.

Corporation Tax and Traditional Partnerships

Do Partnerships Pay Corporation Tax?

No traditional partnerships do not pay corporation tax in the UK.

Instead, each individual partner is treated as self-employed and pays Income Tax on their share of the partnership’s profits. These profits are reported on each partner’s Self-Assessment tax return. Partners must also pay Class 2 and Class 4 National Insurance contributions, depending on their income level.

Key Tax Obligations for Traditional Partnerships

• Registering the Partnership with HMRC for tax purposes
• Filing a Partnership Tax Return (SA800) annually
• Each partner filing a Self Assessment return (SA100)
• Paying Income Tax and National Insurance on individual profits

You can find full guidance on how partnerships are taxed via the HMRC guide on partnership returns.

Corporation Tax and LLPs

What is an LLP?

A Limited Liability Partnership (LLP) combines elements of a traditional partnership with the legal structure of a company. Members (partners) have limited liability, and the LLP is a separate legal entity meaning it can own assets, enter contracts, and be sued in its own name.

Despite this corporate structure, LLPs are not usually subject to corporation tax unless certain conditions apply.

LLPs and Income Tax

In most cases, LLPs are treated like partnerships for tax purposes. This means:

• Each member (partner) is taxed individually via Self-Assessment
• LLPs file a partnership tax return (SA800)
• Members are subject to Income Tax and National Insurance, not corporation tax

However, if your LLP meets specific criteria, HMRC may treat it as a company for tax purposes.

When Does an LLP Pay Corporation Tax?

Under the Mixed Membership Rules and certain corporate partnership anti-avoidance rules, an LLP may be subject to corporation tax if:

• It is considered not carrying on a business with a view to profit
• It is controlled by corporate members
• It engages in tax planning or avoidance schemes involving corporate members

If HMRC deems the LLP to be operating more like a company, it could be reclassified and become liable for corporation tax at the current rate.

This is why it’s crucial to assess your LLP’s structure and intention regularly.