Ltd Company for Doctors (UK): When It Makes Sense (and When It Doesn't): medical career toolkit (2026)

Key points

A limited company can be tax-efficient for doctors with significant non-NHS income (private practice, medico-legal, consultancy).
IR35 is the critical constraint: if your locum work is 'inside IR35' (which most NHS locum work is), the tax advantages of a Ltd company largely disappear.
Running a company has real costs: accounting fees, admin time, and regulatory obligations. Don't incorporate for tax savings alone without modelling the numbers.

The question 'should I set up a limited company?' is one of the most asked and worst-answered questions in doctor finance. The answer depends almost entirely on two things: (1) how much of your income is outside IR35, and (2) whether the tax saving exceeds the costs of running a company. For many doctors, the answer is 'not yet'. For some, it is clearly advantageous. This guide helps you figure out which group you are in.

Step 1 — Understand IR35 first (this gates everything)

IR35 is the tax legislation that determines whether a contractor is 'really' an employee for tax purposes. If your engagement is 'inside IR35', you pay employment-equivalent tax regardless of your company structure — negating most of the tax advantage of operating through a Ltd company. Most NHS locum work is inside IR35. Private practice, medico-legal work, and genuine consultancy are more likely to be outside IR35. Read our IR35 guide for the full picture.

Step 2 — Map your income streams

List all your income sources: NHS salaried, NHS locum (inside IR35), private practice, medico-legal, teaching/lecturing, consultancy, and any other professional income. The Ltd company is primarily beneficial for income that is outside IR35. If 90% of your income is NHS salaried + NHS locum, a company may not be worth the hassle.

Step 3 — Model the tax position

With a limited company, you pay: Corporation Tax on company profits (currently 25% for profits over £250K, 19% for small profits), and then Income Tax + NI when you extract money (via salary + dividends). The tax saving comes from the difference between dividend tax rates and employment income tax rates. An accountant can model the exact numbers for your income level — do this before incorporating.

Step 4 — Account for real costs

Company running costs include: accountant (£1,000–£3,000+/year), Companies House filings, business bank account, professional indemnity (if not covered by NHS), and your admin time (VAT returns if registered, bookkeeping, payroll). If your outside-IR35 income is less than ~£30–40K/year, the admin burden and costs may exceed the tax saving.

Step 5 — Consider the pension angle

A limited company can make employer pension contributions, which are tax-deductible for the company and do not count as personal income. This can be useful for tax-efficient pension top-up — but interact with NHS Pension annual allowance rules. Get specialist advice if you are in both the NHS Pension and a personal/SIPP pension.

Step 6 — The decision framework

Incorporate if: you have significant outside-IR35 income (£30K+/year), you are willing to manage company admin, and the modelled tax saving justifies the costs. Do not incorporate if: almost all your income is inside IR35, you dislike admin, or you are doing it based on forum advice without modelling your specific numbers. When in doubt: talk to an accountant who specialises in medical professionals.

The 'everyone says I should' trap

Doctor WhatsApp groups and forums are full of advice to 'go Ltd'. Much of this advice is based on pre-2021 IR35 rules when more locum work was outside IR35. The landscape changed in April 2021 when IR35 determination responsibility shifted to the end client for medium/large organisations (including most NHS trusts). Get current, personal advice — not outdated group chat wisdom.

References

HMRC — Understanding off-payroll working (IR35)

UK Government — Corporation Tax rates

Your learning path

Save your place and choose what comes next

Work through this guide (6 steps)

Use the actions from this article to track what you have worked through.

Step 1 — Understand IR35 first (this gates everything)
IR35 is the tax legislation that determines whether a contractor is 'really' an employee for tax purposes. If your engagement is 'inside IR35', you pay employment-equivalent tax regardless of your company structure — negating most of the tax advantage of operating through a Ltd company. Most NHS locum work is inside IR35. Private practice, medico-legal work, and genuine consultancy are more likely to be outside IR35. Read our IR35 guide for the full picture.
Return to this section
Step 2 — Map your income streams
List all your income sources: NHS salaried, NHS locum (inside IR35), private practice, medico-legal, teaching/lecturing, consultancy, and any other professional income. The Ltd company is primarily beneficial for income that is outside IR35. If 90% of your income is NHS salaried + NHS locum, a company may not be worth the hassle.
Return to this section
Step 3 — Model the tax position
With a limited company, you pay: Corporation Tax on company profits (currently 25% for profits over £250K, 19% for small profits), and then Income Tax + NI when you extract money (via salary + dividends). The tax saving comes from the difference between dividend tax rates and employment income tax rates. An accountant can model the exact numbers for your income level — do this before incorporating.
Return to this section
Step 4 — Account for real costs
Company running costs include: accountant (£1,000–£3,000+/year), Companies House filings, business bank account, professional indemnity (if not covered by NHS), and your admin time (VAT returns if registered, bookkeeping, payroll). If your outside-IR35 income is less than ~£30–40K/year, the admin burden and costs may exceed the tax saving.
Return to this section
Step 5 — Consider the pension angle
A limited company can make employer pension contributions, which are tax-deductible for the company and do not count as personal income. This can be useful for tax-efficient pension top-up — but interact with NHS Pension annual allowance rules. Get specialist advice if you are in both the NHS Pension and a personal/SIPP pension.
Return to this section
Step 6 — The decision framework
Incorporate if: you have significant outside-IR35 income (£30K+/year), you are willing to manage company admin, and the modelled tax saving justifies the costs. Do not incorporate if: almost all your income is inside IR35, you dislike admin, or you are doing it based on forum advice without modelling your specific numbers. When in doubt: talk to an accountant who specialises in medical professionals.
Return to this section

Finances · Article 16 of 16

Ltd Company for Doctors (UK): When It Makes Sense (and When It Doesn't)