A limited company pays corporation tax (19% on small profits, up to 25%) instead of income tax at up to 45% plus National Insurance. You then extract money as a small salary plus dividends, which carry no National Insurance and lower tax rates. Retain profit inside the company and you defer personal tax altogether. On paper, at a decent income, the saving looks compelling.
NHS earnings routed through a limited company generally cannot be superannuated — you'd stop building NHS pension on that income. The NHS scheme provides a guaranteed, index-linked, career-average pension that private saving struggles to replicate: for many associates the annual value of pension growth given up is worth more than the tax saved by incorporating.
Do it properly: a company bank account and clean bookkeeping, your associate agreement in the company's name (practices vary in how they handle this), a sensible salary-plus-dividend structure reviewed annually — dividend tax rates and the £500 dividend allowance move the optimum around — and an annual check that the company still earns its keep. Circumstances change; the structure should be re-tested, not set and forgotten.
Start with our associate tax guide if you're new to self-employment, and the NHS pension guide for the other side of the scales.
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Generally no — NHS associate earnings paid to a company can't be superannuated in the NHS scheme, so incorporating NHS income usually means giving up NHS pension growth on it. That lost growth is often worth more than the tax saving, which is why the decision needs modelling, not a rule of thumb.
There's no universal threshold — it depends on your NHS/private mix, whether you spend or retain profit, your pension position and family circumstances. Heavily private, high-earning associates who can retain profit benefit most; predominantly NHS associates often shouldn't incorporate at all.
Company accounts and corporation tax filings, director payroll, dividend paperwork, a confirmation statement and a personal return on top — plus keeping company money properly separate. Budget for higher accountancy fees and factor them into the comparison.
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