Private Practice
Private practice offers consultants and specialist doctors an opportunity to supplement NHS income, gain clinical autonomy and build long-term wealth. Yet moving from salaried NHS work to running your own practice introduces a new set of financial, regulatory and operational considerations. This hub brings together our guidance on every stage, from initial setup through to growth and exit planning.
Private Practice
Before seeing your first private patient, several foundational steps need to be in place. You will need to register with the relevant private medical insurers (such as Bupa, AXA Health and Aviva) to appear on their practitioner directories and receive direct settlement of fees. Applying for practising privileges at one or more private hospitals gives you access to theatres, consulting rooms and diagnostic facilities. Each hospital has its own credentialing process, typically requiring evidence of GMC registration, indemnity cover, appraisal completion and specialist training.
You must also notify HMRC that you are receiving self-employment income and register for Self Assessment if you are not already in the system. Opening a dedicated business bank account keeps practice income and expenses separate from personal finances, simplifying bookkeeping and tax returns. Many consultants start by practising as a sole trader, which is the simplest structure, and review whether a limited company would be more tax-efficient once fee income reaches a meaningful level.
1. Insurer directories
Register with the private medical insurers, such as Bupa, AXA Health and Aviva, to appear on their practitioner directories and receive direct settlement of fees.
2. Practising privileges
Apply at one or more private hospitals for access to theatres, consulting rooms and diagnostic facilities.
3. Credentialing evidence
Each hospital typically asks for GMC registration, indemnity cover, appraisal completion and specialist training.
4. HMRC and banking
Notify HMRC of the self-employment income, register for Self Assessment, and open a dedicated business bank account.
How you structure your private earnings has a direct impact on your tax bill. As a sole trader, all practice profits are added to your other income and taxed at your marginal rate, which is often 40% or 45% for consultants with substantial NHS salaries. Operating through a limited company allows you to pay yourself a tax-efficient combination of salary and dividends, and profits left in the company bear corporation tax rather than your marginal income tax rate until they are extracted. Whether that is an overall saving depends on how much you actually need to draw, because extraction carries its own dividend tax, so incorporation is not a clear win at typical private-practice income levels and has to be modelled on your own figures.
The decision to incorporate should weigh up several factors: the level of profit you intend to retain in the business, the administrative burden of running a company, the impact on NHS pension contributions and whether you plan to employ staff or associates. Consultants in group practices may prefer a partnership or LLP, which offers liability protection while keeping the tax position transparent. Whatever the structure, an annual tax-planning review ensures you are extracting income in the most efficient way as rates and allowances change.
| Structure | How profits are taxed | What it suits |
|---|---|---|
| Sole trader | Added to your other income and taxed at your marginal rate | The simplest start, reviewed once fee income reaches a meaningful level |
| Limited company | Corporation tax on profits, then salary and dividends drawn from the company | Profit intended to be retained in the business |
| Partnership or LLP | Transparent, allocated to members and taxed personally | Consultants in group practices wanting liability protection |
Most medical services provided by a registered medical practitioner are exempt from VAT under UK law, which means you do not charge VAT on consultation fees, surgical procedures or diagnostic services. However, VAT exemption is not universal. Medico-legal reports, cosmetic procedures that are not clinically necessary, expert-witness fees and certain occupational-health services may be standard-rated at 20%.
If your taxable (non-exempt) turnover exceeds the VAT registration threshold, currently £90,000, you must register for VAT and charge it on those supplies. Because exempt income does not count towards the threshold, many doctors are surprised to find that only a portion of their total fees are relevant. Partial exemption rules also limit how much input VAT you can reclaim on costs that relate to both exempt and taxable activities. Getting the VAT position right from the outset avoids costly retrospective assessments and penalties.
| Supply or test | VAT treatment |
|---|---|
| Consultation fees, surgical procedures, diagnostic services | Exempt where provided by a registered medical practitioner |
| Medico-legal reports and expert-witness fees | May be standard-rated at 20% |
| Cosmetic procedures that are not clinically necessary | May be standard-rated at 20% |
| Certain occupational-health services | May be standard-rated at 20% |
| Registration threshold | £90,000 of taxable, non-exempt turnover |
| Exempt income | Does not count towards the threshold |
Note: VAT registration threshold and standard rate, 2026/27
Adequate indemnity cover is a GMC requirement and a practical necessity. For private practice, you need cover that extends beyond the state-backed CNSGP scheme, which only applies to NHS GP work. The main medical defence organisations (MDU, MPS and MDDUS) offer discretionary indemnity, while commercial insurers provide occurrence-based or claims-made policies. The right choice depends on your specialty, procedure mix and risk profile.
Beyond clinical indemnity, consider public-liability insurance (if you own or lease premises), employers' liability insurance (mandatory if you employ staff), cyber-insurance (increasingly important as practices hold digital patient records) and income-protection cover to replace earnings if illness or injury prevents you from working. Premiums for all insurance directly related to your practice are tax-deductible. Reviewing your cover annually ensures there are no gaps, especially after expanding into new procedures or taking on associates.
Clinical indemnity
Cover beyond CNSGP, which applies only to NHS GP work. Discretionary indemnity from the MDU, MPS or MDDUS, or an occurrence-based or claims-made policy from a commercial insurer.
Public liability
Where you own or lease premises.
Employers' liability
Mandatory if you employ staff.
Cyber insurance
Increasingly important as practices hold digital patient records.
Income protection
Replaces earnings if illness or injury prevents you from working.
The tax treatment
Premiums for insurance directly related to your practice are tax-deductible.
A private practice is a business, and sustainable growth requires financial discipline. Key metrics to track include fee income per session, consultation-to-procedure conversion rate, debtor days (how quickly insurers and self-pay patients settle invoices) and overhead ratio. Building a cash reserve of at least three months' operating costs protects against the income volatility that many new practices experience.
Growth strategies range from expanding your insurer panel and building GP referral networks to investing in marketing, hiring a practice manager or bringing in associate consultants. Each step has financial and tax implications. Employing staff triggers PAYE, auto-enrolment pensions and employment-law obligations, while leasing premises commits you to fixed costs. A long-term financial plan, reviewed annually with your accountant, keeps growth aligned with your personal income goals, pension strategy and eventual exit plan, whether that is selling the practice, winding down gradually or transitioning to a group model.
| Metric or step | What it tells you, or what it triggers |
|---|---|
| Fee income per session | Earnings measured against clinic time |
| Consultation-to-procedure conversion | How many consultations go on to a procedure |
| Debtor days | How quickly insurers and self-pay patients settle invoices |
| Overhead ratio | Practice overheads measured against fee income |
| Cash reserve | At least three months of operating costs, against income volatility |
| Employing staff | PAYE, auto-enrolment pensions and employment-law obligations |
| Leasing premises | A commitment to fixed costs |
The library
7 guides in this topic.
Come forward now. An unprompted disclosure of careless behaviour starts at a 0% penalty and a prompted one starts at 15%, so the letter from HMRC is what costs you money. Careless behaviour opens six years, deliberate behaviour twenty, and reasonable care only four.
5 min read
An optical practice makes a mixed supply. The sight test is exempt medical care, the frames and lenses are standard-rated goods, and the dispensing built into the price of a finished pair has been a separate exempt supply since 1995, provided the establishment is a section 9 body corporate, a qualified sole proprietor, or dispenses through a registered optician or staff under one's direct supervision. Fail all four and the whole supply is standard-rated. This guide covers that gateway, how a single charge is split between the elements, the choice between apportionment and separately disclosed charges, what HMRC requires of a method now that prior approval has gone, and a full apportionment worked through on illustrative figures.
8 min read
Half of this audience is VAT exempt and half is standard-rated. The dividing line is which statutory register you are on, and clinical similarity between the two groups counts for nothing. This guide sets out which allied-health professions are named in VAT Notice 701/57, which therapy professions are excluded from the exemption because no statutory register exists for them, what crossing the £90,000 threshold does to a standard-rated practice, and the two conditions that can take a registered practitioner outside the exemption anyway.
6 min read
A veterinary practice is a commercial business with no NHS contract, no NHS Pension Scheme and standard-rated fees, and the question that dominates its owners' tax planning is what to do about the corporate groups that now own most of the market. This guide covers what a buyer is paying for, how the price is usually structured, how an earn-out is taxed before it is received, and what to establish before answering an approach.
7 min read
Medico-legal and expert-witness report fees are self-employed trading income for doctors, taxed on top of NHS salary with one defining VAT feature: the reports are standard-rated, not exempt, because their primary purpose is to help a court, insurer or solicitor make a decision rather than to treat the patient. This guide covers the tax calculation (including the 60% personal-allowance taper trap for consultants between £100,000 and £125,140), why the purpose test makes reports standard-rated, how the £90,000 VAT registration threshold works when only non-exempt turnover counts, allowable expenses, a worked example for 2026/27 and the sole-trader versus company question.
12 min read
When a doctor sells a genuinely private medical business, capital gains tax applies in full and Business Asset Disposal Relief can cut the rate. This guide walks through the CGT computation, the BADR conditions and limits, and how the contract date under TCGA 1992 section 28 fixes the date of disposal and so the rate band that applies.
15 min read
Most consultants and GPs run an NHS post alongside private work, and the two are taxed under different rules at the same time. This guide explains how PAYE and self-employed private income stack up, which slices are NHS-pensionable, where VAT bites on cosmetic and medico-legal work, and when private income is large enough to justify a company.
9 min read
Free consultation
Three income streams, three treatments, and the errors happen where they meet. We look at the split, the expenses that hold up, and whether incorporating the private side is worth what it costs in pension accrual.
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