Partners in a general or limited partnership, and members of an LLP, are self employed for National Insurance. Each individual partner pays Class 4 contributions through Self Assessment on their own share of the trading profit, at 6% on profits between £12,570 and £50,270 and 2% above that for 2026 to 2027. The exception is an LLP member who meets all three salaried member conditions: that member is treated as an employee, and the LLP must deduct Class 1 through payroll and pay employer contributions on top.

Why do partners pay Class 4 rather than Class 1?

Class 1 is charged on earnings from an employment. A partner is not an employee of the firm, so a profit share is not earnings. HMRC’s Partnership Manual at PM275500 says that no secondary Class 1 contributions are due on profits allocated to partners, because they are not employees and do not receive employment income. For an LLP, section 863 of the Income Tax (Trading and Other Income) Act 2005 (ITTOIA) treats the LLP’s activities as carried on in partnership by its members, so members are taxed as partners rather than as employees of the LLP.

PM275300 confirms that individual partners are liable to Class 4 on their own share of the profits of the trade or profession carried on by the partnership. Company partners are outside National Insurance altogether; the corporate member’s share is taxed under Corporation Tax instead, which is the territory of mixed member partnerships.

A partnership “salary” does not change this. In HMRC’s allocation examples at PM163060, salaries agreed between partners are simply the first slice of the profit allocation. They are part of the partner’s profit share, so they go through Self Assessment and attract Class 4, not PAYE and Class 1.

The label must reflect reality, though. PM275500 tells HMRC officers to look closely at cases where people with no real rights as partners are described as partners so that employer Class 1 can be avoided. Someone called a “salaried partner” in a general partnership who is in substance an employee is an employee under the normal employment status tests, and the firm owes Class 1 on their pay.

How is a partner’s Class 4 worked out?

Class 4 is charged on the profits of a tax year under section 15 of the Social Security Contributions and Benefits Act 1992 (SSCBA). The National Insurance Manual at NIM24605 explains that the starting point is the trading profit as computed for Income Tax, so for a partner it is their allocated share of the firm’s taxable profit as shown on the partnership return and their own return.

The profit limits are applied to each partner separately. A firm with four partners does not share one £12,570 limit; each partner has their own. For 2026 to 2027 each partner pays:

  • nothing on the first £12,570 of profit
  • 6% on profit between £12,570 and £50,270
  • 2% on profit above £50,270

A few adjustments differ from Income Tax. Under Schedule 2 paragraph 3 SSCBA, personal pension contributions and personal reliefs are not deductible. Interest on a loan to invest in the partnership is deductible for Class 4 only where the money is used wholly for the purposes of the trade, for example as working capital or to buy business assets; NIM24605 says there is no Class 4 relief where the loan was used to buy a share of the partnership from another partner.

Losses are relieved for Class 4 in the same way as for Income Tax, but PM275400 notes a timing difference. If an Income Tax loss is set against income that does not attract Class 4, such as savings income, the loss is treated as unused for Class 4 and carried forward against future profit shares from the same partnership.

Where a profit share includes income on which Class 1 has already been paid, regulation 94A of the Social Security (Contributions) Regulations 2001 removes it from the Class 4 computation. NIM24625 gives the example of a sub postmaster whose Class 1 salary is brought into the partnership profits: only that partner gets the deduction.

What about Class 2 and the partner’s contribution record?

From 6 April 2024 there is no liability to pay Class 2 contributions (NIM24523). A partner whose profits are £7,105 or more for 2026 to 2027 has Class 2 treated as paid, which gives a qualifying year for State Pension without any payment. A partner with profits below £7,105 can choose to pay voluntary Class 2 at £3.65 a week to protect the year.

Sleeping partners are included. HMRC changed its view so that sleeping and inactive partners are treated as self employed earners liable to Class 4. NIM24523 explains that this has been enforced for general and limited partnerships from 2013 to 2014, and for LLPs from 2015 to 2016. A partner who contributes capital but does no work still pays Class 4 on their share of a trading profit.

When does an LLP member move to Class 1?

Since 6 April 2014, section 863A ITTOIA treats an individual LLP member as employed by the LLP if all three conditions are met. These are covered in detail in our guide to the salaried member rules; in outline:

  1. Condition A: it is reasonable to expect that at least 80% of the amount payable for the member’s services will be disguised salary, meaning fixed or not in practice affected by the LLP’s overall profits (section 863B).
  2. Condition B: the member does not have significant influence over the affairs of the LLP.
  3. Condition C: the member’s capital contribution is less than 25% of the disguised salary expected for the year.

Failing any one condition keeps the member self employed. PM251010 confirms that corporate members, and members who do not work for the LLP, cannot be salaried members. The rules apply only to LLPs, not to general or limited partnerships.

The National Insurance consequence comes from regulation 3 of the Social Security Contributions (Limited Liability Partnership) Regulations 2014 (SI 2014/3159). Where the member is treated as employed for Income Tax, they are also treated as employed in employed earner’s employment by the LLP. The amounts taxed as employment income, other than benefits taxed under the benefits code, are treated as earnings, and the LLP is the secondary contributor. In practice that means payroll: the LLP deducts employee Class 1 from the member’s drawings and pays employer Class 1 on top.

For 2026 to 2027 the employee rate is 8% between the primary threshold of £12,570 a year and the upper earnings limit of £50,270, and 2% above it. The employer rate is 15% on earnings above the secondary threshold of £5,000 a year.

How large is the difference in practice?

Illustration only. An LLP member has a fixed profit share of £60,000 for 2026 to 2027, using annual figures and ignoring any Employment Allowance.

Treatment Member pays LLP pays Total
Self employed member (Class 4) £2,262.00 + £194.60 = £2,456.60 Nil £2,456.60
Salaried member (Class 1) £3,016.00 + £194.60 = £3,210.60 £8,250.00 £11,460.60

The Class 4 figure is 6% of £37,700 plus 2% of £9,730. The employee Class 1 figure is 8% of £37,700 plus 2% of £9,730. The employer figure is 15% of £55,000. The gap of roughly £9,000 a year is why HMRC scrutinises fixed share membership closely, and why LLPs review the conditions each time arrangements change.

Which partners stop paying Class 4?

  • Partners over State Pension age. GOV.UK says a self employed person stops paying Class 4 from 6 April after reaching State Pension age. Someone reaching it on 6 September 2026 stops from 6 April 2027 and pays the final Class 4 bill by 31 January 2028.
  • Corporate partners. Only individual partners pay Class 4 (PM275300).
  • Not married women with the old reduced rate election. NIM24040 confirms they still pay Class 4 on the same basis as anyone else; see the married women’s reduced rate election.

How and when is it paid?

Class 4 is collected through each partner’s Self Assessment return with their Income Tax. GOV.UK confirms that payments on account, due on 31 January and 31 July, include Class 4 for the self employed, so a partner whose profit share rises sharply can face a large balancing payment the following January. The partnership itself files the SA800 partnership return showing each partner’s share, but it does not pay any partner’s National Insurance.

A salaried member is different. The LLP must be registered as an employer before the first payday and report the member’s pay through Real Time Information, exactly as for staff.

What mistakes come up most often?

  • Running partnership “salaries” through payroll. They are profit allocations and belong in Self Assessment.
  • Deducting personal pension contributions in working out Class 4 profits.
  • Assuming a sleeping or capital only partner has no National Insurance to pay.
  • Claiming Class 4 relief for interest on a loan used to buy out a retiring partner.
  • Testing the salaried member conditions once on joining and never again. Condition A is reassessed whenever relevant arrangements are put in place or modified.
  • Describing employees as partners to avoid employer Class 1, which HMRC specifically looks for.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.