Digital Nomad Tax

UK LLP for Digital Nomads: Same Benefits as a US LLC?

Many digital nomads look to the US LLC to structure their business. In this article, we’ll discuss if the UK LLP for digital nomads could be an alternative to the US LLC. 

In a previous article, we discussed why a US LLC is an interesting option for some digital nomads. Spoiler: it could help you to avoid taxes altogether.

Furthermore, we also had a look at the Canadian Limited Partnership as it has similar characteristics as the US LLC.

uk llp for digital nomads

UK LLP for digital nomads: what is it? 

We are talking about a Limited Liability Partnership in the United Kingdom here which we’ll refer to as UK LLP.

Basically, the UK LLP is a company formed according to the rules of the United Kingdom.

As the name indicates, your liability will be limited if you choose to work with a UK LLP for digital nomads because it is a separate legal entity.

Therefore, creditors can only claim funds from the partnership but not from you personally. Depending on the sector you work in, this might be important to you. 

UK LLP: taxes

If you’re reading this article, you’re probably also interested in the tax implications of setting up a LLP to organise your business. 

UK Taxes

From a UK tax point of view, the UK LLP is a pass-through entity.

This means that the LLP itself will not pay any (corporate) income taxes.

However, the LLP does need to keep proper financial accounts and file these with the Companies House.

Furthermore, you will also need to file an (empty) tax return for the partnership itself. 

Still, this is not where the story ends. As a partner of the LLP, the burden to report your part of the  income of the business falls on you.

Nevertheless, if you are not a tax resident in the UK as a private individual yourself, you don’t need to declare and pay any taxes in the UK.

However, this does not apply if you would go to the UK to perform any of your work from within the country. 

Taxes Abroad

We established that you’ll probably not pay any taxes in the UK. Yet, we need to look at the full scope here.

The reason is that you need to assess what your tax liability is in your country of personal tax residence. 

This will all depend on the local tax laws of the country you are a tax resident in.

Therefore, it’s imperative that you understand the rules there and how they are applied to the income from your UK LLP for digital nomads. 

city of london

UK LLP: process & obligations

Incorporation UK LLP for digital nomads

The UK LLP for digital nomads is a partnership. Hence, you’ll need at least two partners.

You could, for example, appoint a family member or friend as a second partner. Another option is that some service providers who assist you with setting up the UK LLP provide you with a second partner if you don’t have one yourself. 

Furthermore, you will also need to make sure you’ll find an official address for the LLP in the UK. Mostly, the company assisting you with the incorporation can provide this. 

LLP agreement

You will also need to draft an LLP agreement which sets out how you will run it.

You need to set out how you will share profits, who can make which decisions, the members’ responsibilities and how a partner can leave or join the UK LLP for digital nomads. 

Obtaining an UTR

Although you aren’t taxable in the UK, you still need to file a yearly tax return to HMRC.

In order to do so, you need to request a Unique Tax Reference (UTR) for the LLP itself and as a partner of the LLP. 

Bank account

In order to start operating your UK LLP, you will need a bank account to receive and make payments.

You can open a bank account for your UK LLP for digital nomads with a traditional UK bank. However, they might require you to visit one of their branches in person.

If you’re not able to visit the UK, you can always opt for a bank account with an online bank like Wise or Revolut.

Conclusion: UK LLP for digital nomads

The UK LLP is a valid alternative to the US LLC. Definitely if you want an entity in Europe, the UK LLP could be your pick.

On the downside, you do need a second partner while you can set up a US LLC with just one member. 

Reach out if you want to learn if the UK LLP is the ideal solution for you or which other ways there are to save taxes!

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