Solicitors celebrate LLP tax relief, but voice concerns over a significant rise in economic crime levy
Law firms breathed a sigh of relief on Wednesday as Chancellor Rachel Reeves’ Budget 2025 failed to introduce a new tax on limited liability partnerships (LLPs). There was also good news for solicitors regarding regulation, though other measures in the budget created mixed reactions within the legal sector.
Despite a budget widely described as “tax-raising,” the Law Society found several positives. Chancellor Reeves did not impose a tax on LLP members, a measure that had been heavily discussed in legal circles. Mark Evans, president of the Law Society, welcomed this decision, stating, “The Law Society has been lobbying on behalf of our members to ensure firms using LLPs are not burdened by a new tax. The legal sector is already grappling with major regulatory changes in anti-money laundering and compliance. Adding another layer would have hampered firms’ ability to invest and grow, ultimately affecting the wider economy.”
Another highlight for the profession was the announcement that the government would not regulate tax advisers, as had been previously suggested. Reeves confirmed that after consultation, the government would work with the sector to raise standards in the tax advice market, avoiding new burdens on small firms. Earlier proposals for mandatory regulation of tax advisers had drawn criticism from the Law Society, which argued that such changes were too broad and would impose additional strain on smaller firms.
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However, not all aspects of the budget were well-received. A significant increase in the Economic Crime (Anti-Money Laundering) Levy, which is imposed on firms regulated for anti-money laundering purposes, drew backlash. In 2026/27, the levy for medium-sized entities will rise from £10,000 to £10,200. For larger firms, those with revenue over £500 million, the increase is far steeper: £500,000 for firms with revenue between £500 million and £1 billion, and £1 million for those with revenues above £1 billion.
Law Society vice-president Brett Dixon expressed concern over the size of the increase, warning that some firms could see a nearly 1,400% rise in their levy. “With the change set to take effect in April, firms have little time to prepare,” Dixon said, calling for more transparency from the government on the rationale behind the hike.
In another measure related to economic crime, Reeves proposed creating a statutory basis for HMRC to reward whistleblowers. Under the new scheme, whistleblowers could receive up to 30% of the additional tax collected if they help recover more than £1.5 million in tax, potentially earning rewards of up to £1 million or more. However, critics, including David Greene, senior partner at Edwin Coe, warned that the scheme would likely be accompanied by numerous conditions.
The budget also included plans to tackle tax avoidance, with a consultation on new powers aimed at closing in on promoters of marketed tax avoidance schemes.
While the budget contained several measures aimed at combating economic crime, there were also concerns over rising taxes, including new levies on dividends, properties valued over £2 million, and electric cars. A controversial cap on salary sacrifice pension contributions was also announced, which could discourage pension savings.
Overall, while the budget contained positive news for LLPs and tax advisers, it also introduced measures that will affect the legal sector, particularly with the increase in the economic crime levy and other tax rises. Solicitors will need to navigate these changes carefully in the coming months.