This guide walks UK doctors through incorporating private practice work, step by step: the decision first, then forming the company, transferring the business, banking, VAT, payroll and dividends, and the pitfalls to watch. It is general information, not personal advice. Incorporation interacts with your NHS pension, your contract type and your wider tax position, so model your own numbers with a specialist before you act.

Before any of the mechanics, one point governs everything below: incorporation is a private-work decision only.

Step 0: Understand what you can and cannot incorporate

A limited company cannot hold an NHS GMS or PMS contract, and income derived from NHS work is not NHS-pensionable if it is routed through a company. So you cannot "incorporate your NHS practice". What you can incorporate is your private and non-NHS work: private consultations and self-pay clinics, insurance medicals, medico-legal and expert-witness work, occupational health, cosmetic and aesthetic clinics, and private locum work that falls outside IR35.

Your NHS role is unaffected by the company. A GP stays a partner or salaried GP in the practice; a hospital consultant stays an NHS employee. Only that NHS post (and a GP partnership's NHS profit share) is pensionable. Our overview of private practice tax and NHS and private income explains how the two sides sit alongside each other.

The NHS pension trap: the cost you must price in

This is the single most important point and the most common oversight. Private or locum income taken from the company as dividends is not NHS-pensionable, so you lose NHS pension accrual on that income entirely. For a hospital consultant, only the NHS employment is pensionable in any event, so the trap bites mainly on GPs and on solo or locum income that would otherwise be pensioned through the practitioner route (the Type 1 Annual Certificate of Pensionable Profits for partners, the Type 2 self-assessment for salaried GPs, or Locum forms A and B for freelance locums).

Whether losing that accrual is a problem or a benefit depends on you. A high-earning consultant or GP partner already breaching the £60,000 annual allowance (2025/26), or caught by the taper where threshold income exceeds £200,000 and adjusted income exceeds £260,000, may actively want private income held outside pensionable pay. A doctor with room to spare in the allowance may be giving up valuable defined-benefit accrual for a modest tax saving. Never look at the tax saving in isolation; always pair it with the pension-accrual loss.

Is it actually worth it? (the honest answer)

Incorporation is not a guaranteed tax win. At 2025/26 rates the pure tax saving from incorporating private work is modest at typical profit levels, and the 2026/27 dividend-rate rise narrows it further. The genuine reasons to incorporate are usually structural: managing the annual-allowance taper, retaining profits to extract across several tax years, bringing in family shareholders, and limiting personal liability. If your only motivation is "dividends are taxed less than salary", do the full numbers first. For the head-to-head comparison, see GP limited company tax benefits and drawbacks and locum doctor limited company pros and cons; this guide focuses on how to incorporate once you have decided it is right.

The incorporation process, step by step

Once you have decided incorporation suits your private work, the practical process runs broadly as follows. Allow several weeks end to end, with most of the time spent on the transfer and the registrations rather than the company formation itself.

  1. Plan the structure and timing. Decide who the directors and shareholders are, the share classes, and whether a spouse or family member will hold shares (this needs genuine commercial substance, not a paper arrangement). Pick a company year-end and an incorporation date that work with your existing accounting period and any disposal timing.
  2. Form the company at Companies House. Choose a compliant name (you cannot use "NHS" or imply a government connection), and register online, providing the registered office, director details, shareholders (the persons of significant control), the share capital and the articles. Online incorporation is usually processed within about 24 hours. Keep the certificate of incorporation safe; you will need it repeatedly.
  3. Transfer the private business to the company. The going concern (the private-practice trade, its equipment and any transferable private goodwill) is transferred to the company under a written agreement. Where there is chargeable private goodwill, consider s.162 incorporation relief (TCGA 1992 s.162, amended by FA 2026 s.39), which can defer the capital gain where the business is transferred wholly or partly for shares. Remember a GP cannot transfer NHS goodwill at all (see the pitfalls below).
  4. Novate or assign the contracts. Review private-hospital practising agreements, room-hire and premises leases, equipment finance and service contracts. Some can be assigned to the company; others need formal novation, and leases often need landlord consent. Update your medical indemnity (MDU, MPS or MDDUS) to a corporate arrangement, and check your GMC position is unaffected.
  5. Open a company bank account. Open an account in the company name using the certificate of incorporation, the articles and director identification. Keep company money strictly separate from personal money from day one; mixing the two creates the director's-loan problem described below.
  6. Register the company for corporation tax with HMRC. Register within three months of starting to trade. This sets your corporation tax filing and payment obligations.
  7. Register for VAT only if you cross the threshold. Register if taxable (non-exempt) turnover exceeds £90,000 in any rolling 12 months. Most medical care is exempt, but standard-rated income (cosmetic-only work, medico-legal reports, some occupational health) can push you over. Our guide to GP VAT registration sets out which income counts.
  8. Set up payroll and decide your extraction. If you take a salary, register as an employer and operate PAYE with Real Time Information reporting. Then run the company accounting: bookkeeping, annual accounts and the corporation tax return.

Step detail: VAT (only if you cross £90,000 of taxable turnover)

The supply of medical care by a registered medical practitioner is exempt from VAT under VATA 1994 Schedule 9 Group 7 where the principal purpose is the protection, maintenance or restoration of health. NHS GMS and PMS income is outside the scope of VAT. Neither exempt nor outside-the-scope income counts towards the registration threshold, so a doctor doing only genuine private clinical care rarely needs to register however high the fees.

The watch-items are standard-rated: purely cosmetic or aesthetic procedures with no therapeutic purpose, medico-legal and expert-witness reports (whose purpose is to let a third party make a decision), and some occupational-health and certification work with no care element. Register within 30 days of the month-end in which taxable turnover crosses £90,000 in a rolling 12 months. The deregistration threshold is £88,000. A company with both exempt and taxable supplies operates partial exemption.

Step detail: payroll, dividends and corporation tax (2026/27 figures)

A typical one-director medical company combines a modest salary with dividends, but the arithmetic has shifted, so use current figures.

  • Corporation tax. The company pays 19% on profits up to £50,000, 25% on profits over £250,000, and marginal relief in between (standard fraction 3/200, FY2025 and FY2026), an effective marginal rate of about 26.5% in the £50,000 to £250,000 band. The return is due 12 months after the year-end, with the tax payable 9 months and 1 day after the year-end. See GP corporation tax for the detail.
  • Salary and employer NIC. The company pays employer (secondary Class 1) NIC at 15% on salary above the £5,000 secondary threshold (from 6 April 2025). The Employment Allowance is £10,500 but is not available to a company whose only employee is a single director, which is why one-director medical companies often set the salary at or near the secondary threshold. A genuinely employed spouse on market-rate pay for real work can change that.
  • Dividends (tag the year). From 6 April 2026 (Finance Act 2026 s.4), dividends above the £500 allowance are taxed at 10.75% (ordinary rate), 35.75% (upper rate) and 39.35% (additional rate, unchanged). For 2025/26 the rates were 8.75%, 33.75% and 39.35%. Dividends sit on top of the corporation tax the company has already paid, which is why the combined rate, not the dividend rate alone, is what matters.
  • Pension as an extraction route. Employer pension contributions are deductible for corporation tax on a paid basis (FA 2004 s.196), carry no NIC and avoid the dividend rates, subject to the £60,000 annual allowance and three-year carry-forward. This is often the most efficient way to take value out of a medical company, but it is a personal pension pot, not NHS accrual.

Common pitfalls to avoid

1. Forgetting the NHS pension cost

The most expensive mistake is treating incorporation as a pure tax play and only later realising the private income that used to be pensioned (or that you assumed would be) now earns no NHS accrual. Decide this deliberately, with the pension modelled, before you incorporate.

2. NHS goodwill cannot be sold

The sale of NHS GP goodwill has been prohibited since 1 April 2004 (current instrument SI 2019/251, which also blocks selling company shares whose value includes that goodwill). So incorporating a GP's NHS work cannot monetise NHS goodwill, and the dentist-style "sell the goodwill and claim relief" playbook does not translate. Only transferable private-practice goodwill can change hands. Business Asset Disposal Relief (18% from 6 April 2026, having been 14% from 6 April 2025 to 5 April 2026 and 10% before that) applies only to a qualifying private-practice or private-company disposal, never to NHS goodwill.

3. The director's loan (s.455) charge

A medical company is a close company. If you draw more than the company can pay you as salary or dividend, you run an overdrawn director's loan, and an s.455 charge applies to the balance outstanding 9 months and 1 day after the period-end: 33.75% on loans made in 2025/26 and 35.75% on loans made on or after 6 April 2026. The charge is repaid under s.458 once you clear the loan, but the relief is deferred (to 9 months and 1 day after the end of the accounting period of repayment), not instant, so the cash is tied up. Plan your drawings so the loan does not run overdrawn at the year-end.

4. Mixing money and missing the basics

Keep company and personal money separate, document every dividend with a board minute and a dividend voucher, and only declare dividends out of distributable profits. If you provide services through the company to NHS trusts or large private hospitals, check the off-payroll position, because the hirer (not you) determines IR35 status for medium and large clients and that can remove the salary-and-dividend efficiency on caught engagements. Our note on locum doctor IR35 explains who decides.

Ongoing obligations once incorporated

An incorporated practice files annual accounts and a confirmation statement with Companies House, a corporation tax return with HMRC, and (if you run payroll) RTI submissions. You will need separate corporate medical indemnity, proper bookkeeping records, and to keep on top of dividend paperwork. These compliance costs are real and recurring, which is part of why incorporation only earns its keep above a certain level of sustained private profit.

Getting it right for your circumstances

The mechanics above are the same for most doctors, but the decision (and the numbers) are personal. The right answer turns on your contract type, your annual-allowance position, how much you want to retain in the company, and your family and succession plans. This guide is general information rather than advice.

As medical-accounting specialists, we model the tax position and the NHS pension-accrual loss side by side, advise on timing and structure, and handle the incorporation and ongoing compliance, so you can see the full picture before you commit. If you are weighing up incorporating your private work, get in touch for a clear, numbers-led view of whether it is right for you.