Annual accounts, partnership and corporation tax returns, and management figures that arrive while you can still do something with them. Plus the two numbers most firms have never worked out: what the practice really earns, and how much of it is sitting in unbilled work.
Most law firm owners get their accounts long after the year they describe, in a format built for filing rather than for running a practice. The profit figure is accurate and useless: it does not tell you which work is making money, how much cash is trapped in unbilled time, or what each partner should have reserved for tax. By the time it lands, the year it covers is a year you can no longer influence.
We do the compliance properly — accounts, the partnership or corporation tax return, VAT — and then we do the part that changes decisions: figures during the year, in language that maps onto how a law firm actually earns. Fees billed, work in progress, lockup, and profit per equity partner before drawings.
Filing and structure
An LLP and a limited company both file accounts at Companies House, and those accounts are publicly visible. Your competitors can read them. So can recruiters, landlords and any client who thinks to look. A traditional partnership of individuals is the only genuinely private option, because it files nothing at Companies House at all. That is a real factor in the structure decision, and it sits alongside — not inside — the tax arithmetic, which we set out on the LLP versus limited company page.
For accounting periods beginning on or after 6 April 2025, a company or LLP qualifies as small — and can normally take audit exemption — if it meets at least two of three tests: turnover not more than £15 million, balance sheet total not more than £7.5 million, and not more than 50 employees. The micro-entity thresholds from the same date are turnover not more than £1 million and a balance sheet total not more than £500,000. The great majority of law firms sit comfortably inside those limits and have no statutory audit.
That is a different thing entirely from the SRA Accountant's Report. An audit is an opinion on whether the accounts give a true and fair view, required by company and LLP law. The Accountant's Report is an assurance engagement on compliance with the SRA Accounts Rules, required by rule 12.1 of those rules. A firm can need the report and have no audit — that is the normal case. What connects them is rule 12.5, which requires the report to be signed by someone who is, or works for, a registered auditor.
The tax
For the financial year beginning 1 April 2026, corporation tax is 19% on profits up to £50,000 and 25% on profits over £250,000. Between the two, marginal relief applies with a standard fraction of 3/200, producing an effective marginal rate of 26.5% on the slice between £50,000 and £250,000. Both limits are divided by the number of associated companies plus the company itself, and reduced for accounting periods shorter than twelve months. So a firm with two associated companies divides by three: its 19% band falls to £16,667 and its main-rate threshold to £83,333 — an expensive surprise for anyone who set up a service company or a property company without thinking about it.
The firm itself pays no tax. It files a partnership return, and each partner or member is taxed on their allocated profit share through self assessment — whether or not it was drawn. The detail, including Class 4 national insurance, payments on account and the transition profits still being spread from basis period reform, is on the partner tax and drawings page.
Registration is compulsory at £90,000 of taxable turnover, a threshold unchanged since 1 April 2024 and confirmed for 2026/27; deregistration is available below £88,000. The backward look requires registration within 30 days of the end of the month in which rolling twelve-month turnover exceeded £90,000, effective from the first day of the second month after the breach. The forward look bites if you expect to exceed £90,000 in the next 30 days alone, effective from the date that expectation arose. All VAT-registered businesses are already inside Making Tax Digital for VAT and were signed up automatically — see Xero for law firms for how the filing works in practice.
The number nobody has
Lockup is work in progress days plus debtor days — the elapsed time between a fee earner doing the work and the firm having the money. Debtor days most firms can at least estimate. WIP days are the half that hides, because unbilled time never appears on an aged debt report and therefore never gets chased.
Illustrative only. Take a firm billing £1.2 million a year, so roughly £3,290 a day of fee income. If WIP runs at 55 days and debtors at 40 days, lockup is 95 days — around £312,000 of the firm's own money sitting in other people's matters. Pull that back by 20 days and the firm releases about £66,000 of cash without winning a single new client, raising a rate or working an extra hour. That is usually the largest and cheapest source of cash in a law firm, and it is invisible in a set of statutory accounts.
Work out your own figure with the lockup calculator, or read the lockup guide for how firms actually bring it down — billing policy, interim billing on long matters, and the practice of writing off nothing until somebody has looked at it.
Management figures are only worth having if they arrive early enough to change something. We work to monthly or quarterly reporting depending on the size of the firm, with fees billed, WIP, lockup, staff cost as a percentage of fee income, and profit per equity partner before drawings — the same handful of numbers every period, so the trend is readable at a glance.
Partnership, LLP or company accounts prepared and filed, with a considered view on what the public filing actually shows about your firm.
Partnership returns, corporation tax returns and the partners' own self assessment returns, joined up so the same profit figure appears in all of them.
Partner taxFees, WIP, lockup, staff cost ratio and profit per equity partner, monthly or quarterly, delivered while the period they describe can still be influenced.
Returns prepared and filed under Making Tax Digital, with the disbursement treatment on your matter types worked through rather than assumed.
Accounts, corporation tax, partnership return, VAT, payroll, self assessment and the rule 12.1 six-month report deadline, on one calendar.
The tax calendarWhether the shape of the firm still fits it — including what the April 2026 dividend rates did to the incorporation arithmetic.
LLP vs limited companyIf the firm is an LLP or a limited company, yes. Both file accounts at Companies House and those accounts are publicly visible, which means competitors, recruiters, landlords and clients can read them. A traditional partnership of individuals is the only genuinely private structure, because it files nothing at Companies House. That is a real consideration when a firm is weighing up incorporation, and it is separate from the tax question. What you can control is the care that goes into the accounts before they are filed, because a set produced purely to clear a deadline is still the version everybody else gets to read.
Usually not. For accounting periods beginning on or after 6 April 2025 a company or LLP qualifies as small, and can normally take audit exemption, if it meets at least two of three tests: turnover not more than £15 million, balance sheet total not more than £7.5 million, and not more than 50 employees. The micro-entity thresholds are turnover not more than £1 million and a balance sheet total not more than £500,000. Most law firms sit well inside those limits. A statutory audit is also a completely different engagement from the SRA Accountant's Report, which is about Accounts Rules compliance rather than a true and fair view.
For the financial year beginning 1 April 2026 the small profits rate is 19% on profits up to £50,000 and the main rate is 25% on profits over £250,000. Between those limits marginal relief applies, using the standard fraction of 3/200, which produces an effective marginal rate of 26.5% on the slice of profit between £50,000 and £250,000. The £50,000 and £250,000 limits are divided by the number of associated companies plus the company itself, and reduced for accounting periods shorter than twelve months. One associated company therefore halves them, to £25,000 and £125,000, so a firm sitting inside a group can find its 19% band far smaller than expected.
The registration threshold is £90,000 of taxable turnover, unchanged since 1 April 2024 and confirmed for 2026/27. There are two tests. The backward look: if your rolling twelve-month taxable turnover exceeds £90,000, you must register within 30 days of the end of the month in which it was breached, with effect from the first day of the second month after the breach. The forward look: if you expect to exceed £90,000 in the next 30 days alone, you register by the end of that 30-day period, effective from the date the expectation arose. Deregistration is possible below £88,000.
Lockup is work in progress days plus debtor days — the total time between doing the work and having the cash. It is the number most firms have never worked out, and it explains the gap between a healthy profit figure and an unhealthy bank balance. A profitable firm with rising lockup is quietly funding its clients, and in a law firm that funding usually comes out of partner drawings or an overdraft. Unbilled time is the harder half, because it never appears on a debtor listing. Our lockup calculator gives you the days and the cash cost of each additional month.
A free conversation about your last set of accounts and your lockup. Most firms leave it knowing one number they had never calculated, and what it is worth to change it.
One short email: what has changed in the Accounts Rules, the dates coming up, and one number worth checking in your firm. No spam, unsubscribe any time.