To Go Limited or Not to Go Limited; A Brief Guide for Doctors

As a financial planner who works closely with doctors and surgeons, I am often asked:
“Should I set up a Limited Company for my private practice or consulting work?”

It’s an excellent question, and one that doesn’t have a “one size fits all” answer. You may have heard rules of thumb like needing at least £24,000 in turnover to make it worthwhile. But the reality is far more nuanced. Sometimes earning an extra £10,000 to £12,000 privately could actually push you over key thresholds, such as the £100,000 childcare benefit limit and leave you worse off overall.

So, let’s look at what a Limited Company (LTD) is, how it works, and why it might (or might not) make sense for you.

What Is a Limited Company?

A Limited Company is a separate legal entity from you as an individual. It can own assets, enter contracts, and even be sued all in its own name. You can decide who owns the company and in what proportions.

Unlike being self-employed, the money earned by the company is not automatically your personal income. It belongs to the company first, which means it’s taxed differently. The company pays Corporation Tax on profits, and you pay Dividend Tax or Income Tax only when you withdraw money.

2025 Corporation Tax Rates
• 19% on the first £50,000 of profit
• rising to 25% on profits over £250,000 (via marginal relief)

Dividend Tax Rates
• Basic rate: 8.75% (£12570 to £50,270)
• Higher rate: 33.75% (£50,271–£125,140)
• Additional rate: 39.35% (over £125,140)
• You also get a £500 annual dividend allowance.

You can also pay yourself a salary from your LTD company via PAYE, which counts as a company expense and reduces the amount of profit subject to Corporation Tax. Salary payments will attract National Insurance for both employer and employee.

Why Consider a Limited Company?

Despite the added complexity, running your private practice, consulting work, or side gig through a Limited Company can have several strategic advantages especially when viewed through the lens of long-term financial planning.

1. Timing Your Income
Because profits belong to the company, and are only charged corporation tax once,  you can choose when to withdraw income. This flexibility allows you to plan around tax thresholds such as the £100,000 childcare limit or defer withdrawals to future years when your income is lower (for example, after retirement or during a career break).

2. Sharing Profits Tax-Efficiently
You can allocate shares in your company to your spouse, partner, or family members. Dividends are then split based on share ownership. If your partner pays tax at a lower rate, this can significantly reduce your household’s total tax bill. Children can be shareholders in some structures, though care is needed to avoid HMRC’s “settlement” rules.

3. Employing Family Members
Your company can employ your spouse or children, as long as they’re genuinely working for the business, paid a fair wage which is not disproportionately high. This can spread income across your spouses potentially lower tax bands and teach financial skills to younger family members (while keeping HMRC happy).

4. Building for Retirement
A Limited Company can make employer pension contributions on behalf of directors and employees up to the lower of their relevant earnings or the £60,000 yearly annual allowance. These contributions are classed as a qualifying business expense for the company, which can reduce your corporation tax. This is a powerful way to build pension wealth outside the NHS scheme and take advantage of some of the flexibilities that come with a private pension.
If your spouse is a director or employee you can make company pension contributions which can allow you to bring balance to your incomes in retirement and potentially reduce the future tax bill.

Advanced Planning Opportunities

Once your company grows, there are additional strategies worth considering:

5. Exiting Your Practice
When you eventually stop working privately, you may be able to wind up your company through a Members’ Voluntary Liquidation (MVL). As long as you have greater than £25,000 in retained profits these can then be withdrawn at Capital Gains Tax rates (14-24%) rather than dividend tax rates.
If you qualify for Business Asset Disposal Relief, you may currently be eiligble for 14% tax rate (rising to 18% from April 2026) on the first £1 million of lifetime business disposal gains.

6. Lending to Yourself
With sufficient retained profits, your company can lend you money for example, to buy a home. By charging interest (HMRC’s official rate is currently 2.5%), you can potentially borrow at lower rates than a bank, and you pay the interest back to your company rather than the bank.

7. Planning for Your Family’s Future
A Family Investment Company (FIC) can allow you to transfer assets to children or future generations while retaining control. For example, the company could purchase an investment property with a loan from you for the deposit and a mortgage for the balance. The company would show as having zero net assets and you can then transfer the shares without facing a tax bill.  They will then benefit from the capital growth and income generated from the investments, all within a structured, tax-efficient framework.

Is a Limited Company Right for You?

The right decision depends on your broader financial picture, your NHS income, private work, family circumstances, and long-term goals.
A Limited Company can be an incredibly powerful tool for tax efficiency, income flexibility, and retirement planning, but it comes with administrative responsibilities and nuances that make professional advice essential.

Final Thoughts
Setting up a Limited Company isn’t just about saving tax it’s about taking control of your income, retirement, and family wealth in a way that supports your career as a medic both now and in the future.

If you’re considering starting a Limited Company or wondering whether it suits your current situation, I’d be happy to help you explore your options.

Let’s make sure your business structure works for you.

Book a consultation today or drop me an email, to discuss how a Limited Company could fit into your personal financial plan.