The tax landscape that made associate incorporation an easy sell has been chipped away for a decade, and April 2026 took another two percentage points off the dividend side. Here is where the maths actually stands, with the workings.
Article · 6 July 2026
Ten years ago the pitch was simple: a generous dividend allowance, 10% entrepreneurs' relief waiting at the end, and corporation tax under 20%. Every one of those has moved against the structure. Here is the 2026/27 position, stated plainly:
Take an illustrative associate with an entirely private book and £120,000 of annual profit, who needs to draw all of it. No NHS pension is in play, so this is the most favourable realistic case for incorporating. Figures are 2026/27, England, and rounded to the nearest pound.
As a sole trader. Income of £120,000 tapers the personal allowance by £1 for every £2 over £100,000, leaving £2,570 of it. Income tax comes to £39,432. Class 4 National Insurance is 6% between £12,570 and £50,270 and 2% above, giving £3,657. Total tax and NIC £43,089, and take-home £76,911.
Through a company. Pay a director's salary of £12,570. Employer NIC at 15% on the £7,570 above the secondary threshold is £1,136. That leaves £106,295 of company profit, which sits in the marginal relief band: corporation tax of £24,418, an effective 22.97%. Distribute the remaining £81,876 as dividends. After the £500 allowance, £37,200 falls in the basic band at 10.75% and £44,176 in the higher band at 35.75%, giving dividend tax of £19,792. Total tax £45,346, and take-home £74,654.
The company is £2,257 worse off — before the extra cost of running it. Add statutory accounts, a corporation tax return, a payroll scheme, a confirmation statement and the higher accountancy fee that goes with all of it, and the gap on full extraction is closer to £4,000 a year against you.
That result is specific to drawing everything. Change that assumption and the answer changes with it. Incorporation still earns its keep in four situations:
For any associate with meaningful NHS work, none of the above is the deciding factor. NHS work carried on through a limited company is not pensionable for you as a practitioner member — the pensionable earnings have to be yours.
Put a number on what that means. An associate with £70,000 of pensionable earnings accrues £70,000 ÷ 54 = £1,296 of pension a year, index-linked and payable for life, for a member contribution of 12.5% — £8,750 — while the employer adds 23.7%, another £16,590. You are being handed £16,590 a year of someone else's money. No incorporation saving on a £70,000 income comes close to replacing it, and the tax comparison above shows the saving is often negative anyway. This is why incorporating a predominantly NHS associate income out of habit is the single most expensive piece of received wisdom in dentistry.
If you have a company, the right question is not "was it right when I did it" but "is it right now". Rates, allowances and your own income mix have all moved — the dividend rates went up in April 2026, BADR went from 14% to 18% on the same date, and your private-to-NHS ratio has probably shifted too. Three things are worth re-testing every year:
Winding a company down cleanly is sometimes the best advice we give, and we would rather say it than keep billing for a structure that costs you money. We re-run this comparison annually for every incorporated client. The full workings, including the private-versus-NHS split, are in our incorporation guide for associates; you can test your own numbers with the incorporation calculator, and the associate tax guide covers the sole-trader position it is being measured against.
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Three changes stacked up. The dividend allowance fell to £500, so almost every pound of dividend is taxed. Dividend rates rose by two percentage points from 6 April 2026, to 10.75% basic and 35.75% higher. And corporation tax reaches an effective 26.5% in the marginal relief band between £50,000 and £250,000 of profit, where most associate companies sit. Profit extracted from a company is taxed twice — once in the company, once on the dividend — and the combined bill on £120,000 fully drawn now comes to £45,346 against £43,089 for a sole trader. The structure only wins where the second layer of tax is deferred or avoided.
For the NHS work routed through the company, effectively yes. Practitioner pensionable earnings have to be your own earnings under your own contract, so NHS income carried on through a limited company is not pensionable for you. The cost is easy to underestimate: on £70,000 of pensionable earnings you accrue £1,296 a year of index-linked pension for life under the 2015 Scheme, and the employer contributes 23.7% — £16,590 a year — on top of your own 12.5%. Against that, a tax saving that may well be negative. Associates with a mixed book sometimes keep NHS work personally and incorporate only the private side, but that has to be structured genuinely, not just described that way.
It is weaker than it was and getting weaker. BADR was 10% until 5 April 2025, 14% for 2025/26 disposals, and is 18% for disposals on or after 6 April 2026, against a main CGT rate of 24% and a £1 million lifetime limit. An 18% exit rate still beats a 35.75% dividend rate, so the relief is real — but you need something to sell and you need to meet the qualifying conditions, and extracting accumulated cash through a wind-up is a narrower route than people assume. Building a company for years on the strength of an exit rate that has risen twice in two years is a bet on tax policy, not a plan.
Not on the strength of one article, but it is a fair question to put to your accountant with actual numbers attached. Test three things. First, how much you genuinely draw: if you take everything, the structure is probably costing you money now. Second, whether retained profit is doing anything — cash sitting idle in a company account is not a strategy, and it complicates a later disposal. Third, your likely exit and timing, because BADR at 18% changes the arithmetic on a wind-up. Closing a company has its own costs and tax consequences, so the comparison is between running it for another five years and unwinding it, not between the company and a blank sheet.
It is deliberately at the favourable end, and the company still loses. £120,000 of entirely private profit with no NHS pension to forgo is close to the best realistic case for incorporating an associate, because it removes the pension argument altogether and puts the income where the personal allowance taper bites. Most associates earn less, have some NHS work, and need to draw most of what they make — all three of which push the answer further against a company. The figures shift again above £125,140, where the personal allowance has gone entirely and the additional rate applies, so the honest answer for any individual is to run their own numbers rather than borrow someone else's.
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