Established practice
You're operating as a sole trader and overpaying tax as a result
A personal service company structure can meaningfully reduce your tax liability at typical UK private consultant income levels. Most consultants know they should review this, few have.
- steps
- 6
- steps
- to start
- 1 to 2 hours
- to start
The short answer
A limited company can reduce tax for a consultant with substantial private profit, but mainly when you leave some of that profit in the company rather than drawing it all each year. Dividend tax rates rose in April 2026, which narrows the gap. Ask a medical accountant to model both routes with your real NHS and private income, pension plans and what you need to draw, before changing anything.
6 steps
Do it yourself: step by step
0 of 6 done
NHS salary, private profit for the last two years, other income, pension contributions, and how much you need to draw each year to live on.
- Time
- 1 to 2 hours
- Typical cost
- Free
- Who does it
- You
Done when: One page of figures ready for your accountant
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Questions to take to your accountant
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Your figures
- NHS salary (gross): £[amount]
- Private profit, last year: £[amount]; year before: £[amount]
- Other taxable income: £[amount]
- Personal pension contributions: £[amount]
- Amount you need to draw each year: £[amount]
Questions
- What would my total tax and National Insurance be this year as a sole trader, and through a limited company if I draw everything?
- What if I leave £[amount] a year in the company?
- How does my NHS salary affect the result, including the personal allowance taper?
- What salary and dividend split would you suggest, and why?
- Could the company make employer pension contributions, and how does that interact with my NHS pension and annual allowance?
- What will the company cost to run each year, including accountancy, payroll and filing?
- Is there anything about my situation (spouse or partner, other income, plans to retire or move) that changes the answer?
- What would I need to do if I wanted to stop trading through the company later?
- When is the best date to switch?
Practical checks before switching
- Each insurer's requirements for paying a company
- Indemnity: who is covered, you or the company
- Hospital practising privileges: any change needed
- NHS employer: any need to inform
- Business bank account opened
- Corporation tax and PAYE registration done
- Privacy notice and ICO registration updated to the company
Avoid these
Common mistakes
- Incorporating because a colleague did, without modelling your own figures.
- Assuming you will save tax while still drawing all the profit every year.
- Forgetting that your NHS salary already uses your lower tax bands.
- Not telling insurers in time, so payments go to the wrong account for months.
- Underestimating the extra accountancy and admin a company brings.
Free tools
Check where you stand
Benchmarks
Dividend tax rates of 10.75% (basic), 35.75% (higher) and 39.35% (additional) for 2026 to 2027, with a £500 dividend allowance
Basic and higher rates each rose by 2 percentage points from 6 April 2026, reducing the advantage of drawing profit as dividends
Source: GOV.UK Tax on dividends
Corporation tax of 19% on profits up to £50,000 and 25% above £250,000, with marginal relief between
The rate the company pays on profit before any dividends
Source: GOV.UK corporation tax rates
Class 4 National Insurance at 6% between £12,570 and £50,270 and 2% above, for 2026 to 2027
Paid by sole traders on profits
Personal allowance falls by £1 for every £2 of adjusted net income above £100,000, reaching zero at £125,140
Why an NHS salary above £100,000 changes the comparison
Source: GOV.UK Income Tax rates
Paul Robinson
14 years in UK private healthcare
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Questions
Frequently asked questions
Is a limited company always better above a certain income?
No. It depends on how much you draw, your NHS salary, pension plans and running costs. Since April 2026 higher dividend tax rates make drawing everything less attractive.
Does it affect my NHS pension?
Private income is not pensionable in the NHS Pension Scheme, so the structure does not change NHS benefits directly. Company pension contributions do count towards your annual allowance, so model them together.
Can my spouse or partner be a shareholder?
Possibly, but HMRC can challenge arrangements that shift income without a genuine role or investment. Take specific advice.
Will insurers pay a company?
Ask each insurer before you switch. Each has its own process for paying a company and updating your billing details, and it can take time.
What about an LLP or partnership with colleagues?
That is a different decision, usually about shared costs and services. Take advice on it separately.
Is this tax advice?
No. This is general information, not tax or legal advice, based on 2026 to 2027 rates for England, Wales and Northern Ireland; Scotland has different income tax bands. Ask a medical accountant or chartered tax adviser to model your own figures, and an independent financial adviser about pensions.
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