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Limited Liability Partnership Taxation in the UK

The easiest way to start a new company formation
#1. Summary
#2. Limited Liability Partnership Taxation in the UK
#3. Advantages of Trading as a Limited Liability Partnership

Limited liability partnership taxation in the UK

LLP Taxation in the UK

What is an LLP and what tax benefits does it have: a limited liability partnership, or LLP, enables you to run your business while shielding your personal finances from any financial problems your business may face in the future. If you choose to register an LLP with Companies House, you must manage your finances carefully, ensuring that you are able to pay your tax liabilities to HM Revenue and Customs in full and on time.

Your LLP's taxation liabilities: once you have register an LLP, you will need to nominate a member to register the LLP for partnership self-assessment with HM Revenue and Customs. The nominated member must then complete a partnership self-assessment tax return each year, which will show each member's share of the profits or losses. The nominated member must send the tax return to HM Revenue and Customs either online or via the postal service. If the nominated member misses the deadline, all members will incur a late filing penalty.

Individual member's taxation liabilities: like a standard partnership, the profits of your LLP will be split between its members. Your LLP's members will therefore be responsible for paying tax on these profits. As the individual members of your LLP will typically be self-employed, they must all register as self-employed and fill out individual self-assessment tax returns. Your members can send their tax returns online or by filling out a paper form and sending it to HM Revenue and Customs via post.

Your members should send their tax returns to HM Revenue and Customs before the deadline, even if they do not have any tax to pay. If they fail to send in their returns, they may face a late filing penalty.

Paying income tax: the individual members of your LLP will have a personal allowance - an amount of tax-free income. The rate of income tax they pay will therefore depend on the amount of income they have above their personal allowance.

Registering for Value Added Tax: if your LLP's turnover exceeds £83,000 a year, your must register an LLP for VAT. You can register for VAT through HM Revenue and Custom. Alternatively, you can register via the post. If you have an expert, you can ask them to submit your LLP's VAT returns and deal with HM Revenue and Customs on your behalf.

Once you have registered, you will receive a VAT registration certificate from HM Revenue and Customs. On this certificate, you will find details of your VAT return deadline. As you will need to submit a VAT return to HM Revenue and Customs every year, you must keep comprehensive VAT records and run a VAT account for your LLP.

You must send your VAT return to HM Revenue and Customs and pay the VAT duties. However, if your LLP owes less than £1.00 in VAT, you will not need to pay anything. If you miss the VAT return deadline and/or the payment deadline, your LLP may incur a penalty.