How is private practice income taxed alongside an NHS salary in 2026/27?

Your NHS post is taxed under PAYE with Class 1 National Insurance taken at source. Private work done as a sole trader is self-employment income reported on the SA103 self-assessment pages and is added on top of your NHS pay to decide which tax band the private profit falls in. Most consultants and GP partners are already higher rate (40% to £125,140) or additional rate (45% above £125,140) on their NHS pay alone, so private profit is usually taxed at the higher or additional rate from the first pound. Self-employed private profit also carries Class 4 National Insurance at 6% between £12,570 and £50,270 and 2% above (2026/27), and Class 2 is no longer a separate payment for profits above the small profits threshold from 6 April 2024.

Is my private practice income NHS-pensionable?

No. For a hospital consultant only the NHS employment is pensionable. Private work done as a sole trader, partnership or company is never NHS-pensionable, and income routed through a limited company and taken as dividends earns no NHS pension accrual at all. For GPs, NHS-derived profit is pensionable via the Type 1 Annual Certificate (partners) or the Type 2 self-assessment (salaried GPs), but private and non-NHS income sits outside that. Any tax saving from incorporating private work has to be weighed against this lost pension accrual.

Do I have to charge VAT on my private practice fees?

Genuine medical care by a registered doctor is exempt from VAT under VATA 1994 Schedule 9 Group 7, where the main purpose of the service is the protection, maintenance or restoration of the patient's health. The watch-items are purely cosmetic or aesthetic procedures with no therapeutic purpose, and medico-legal or expert-witness reports whose primary purpose is to help a third party make a decision, which are standard-rated. Only that non-exempt turnover counts towards the £90,000 VAT registration threshold (from 1 April 2024), so a doctor doing mainly exempt clinical work rarely has to register unless cosmetic or medico-legal fees alone cross £90,000.

Can I offset private practice expenses against my NHS salary?

No. Private practice expenses (indemnity for private work, equipment, room hire, secretarial support) can only be set against private practice income, not your NHS PAYE salary. Costs that genuinely cover both, such as your GMC retention fee, MDU/MPS/MDDUS subscription or relevant Royal College fees, are apportioned on a fair basis. Keep private practice money in a separate bank account so the split is clean if HMRC ever asks.

When should a consultant or GP put private work into a limited company?

Incorporation only ever applies to private work, because a company cannot hold an NHS GMS or PMS contract and company income is not NHS-pensionable. At 2026/27 rates the pure tax saving at typical private-income levels is modest, and the dividend rate rise to 10.75% ordinary and 35.75% upper from 6 April 2026 narrows it further. The real reasons are usually managing the pension annual allowance taper, retaining profit in the company, or asset protection, not headline tax. Always model the lost NHS pension accrual alongside any saving before deciding.

Private Practice

NHS Salary Plus Private Income: How Your Tax Actually Works

1 April 2026•Medical Accountants UK Editorial Team•9 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.

Most consultants and many GPs are running two tax systems at once. The NHS post is taxed at source under PAYE, while private work (insurance medicals, self-pay clinics, medico-legal reports, cosmetic procedures, occupational health) is self-employment that you report yourself. The two streams interact in ways that catch a lot of doctors out, and getting the interaction wrong costs real money in unnecessary tax, surprise payments on account or lost NHS pension accrual.

This guide explains how an NHS salary plus private income is actually taxed together in 2026/27: how the streams stack up, which slices are pensionable, where VAT starts to bite, and at what point private income is large enough to justify a company. It is general information for UK doctors, not personal advice.

How an NHS Salary and Private Income Stack Up

The starting point is your role, because it decides how each stream is taxed.

Hospital consultant: an employee of the NHS, taxed under PAYE with Class 1 National Insurance deducted at source, an active NHS Pension member. Any private work on top is a sole trader, partnership or company, and is taxed separately.
Salaried GP: an employee of the practice, PAYE and Class 1, an NHS pension member. Private sessions, locum work or expert-witness fees on the side are self-employment.
GP partner: self-employed, taxed on a share of practice profit (not drawings) through the partnership pages of the self-assessment return. Private income sits alongside that share.

Your private profit does not get its own fresh set of tax bands. It is added on top of your NHS pay and taxed at whatever band it falls in. Because most consultants and GP partners are already higher-rate (40% up to £125,140) or additional-rate (45% above £125,140) taxpayers on their NHS income alone, private profit is usually taxed at the higher or additional rate from the very first pound. There is no quiet basic-rate slice waiting for it.

Self-employed private profit also carries Class 4 National Insurance: 6% on profits between £12,570 and £50,270 and 2% above £50,270 for 2026/27 (the main rate dropped from 9% to 6% on 6 April 2024). Class 2 is no longer a separate payment from 6 April 2024 where profits are at or above the small profits threshold, so there is no weekly Class 2 charge to budget for any more. The NHS Class 1 deducted from your salary and the Class 4 on your private profit are calculated independently of each other.

What Is NHS-Pensionable, and What Is Not

This is the single most important point for a doctor mixing NHS and private income, and the one most often misunderstood. For a hospital consultant, only the NHS employment is pensionable. Private work, whether you run it as a sole trader, a partnership or a company, is never NHS-pensionable. There is no route to feed private fees into the NHS Pension Scheme.

For GPs, NHS-derived profit is pensionable but private income is not. Partners pension their NHS profit through the Type 1 Annual Certificate of Pensionable Profits, and salaried GPs through the Type 2 self-assessment. Private and non-NHS income falls outside that machinery entirely. For the detail of how a sessional or freelance GP captures their NHS pension, see our guide on NHS pension Form A and Form B for locums.

The practical consequence: if you incorporate private work and take the profit as dividends, you earn no NHS pension accrual on it whatsoever. That is not a rounding error, it is a structural feature of the scheme. Whenever you weigh up incorporation, the lost pension accrual has to sit on the scales next to the headline tax saving. We come back to this below and in our guide to incorporating a private medical practice.

If you are an in-scheme member, your NHS pension annual allowance is £60,000 for 2025/26. It tapers where your threshold income exceeds £200,000 and adjusted income exceeds £260,000, falling by £1 for every £2 of adjusted income above £260,000, down to a floor of £10,000. (These figures replaced the old £40,000 allowance, the £240,000 adjusted-income threshold and the £4,000 floor; the headline allowance rose from £40,000 to £60,000 back in April 2023.) The measure for a defined-benefit scheme is the growth in your pension's value (the pension input amount), not the contributions you pay. Private income on top of NHS pay is exactly what pushes high-earning doctors over the taper thresholds, so it is worth modelling before the year-end rather than discovering the charge afterwards. Our tapered annual allowance guide and the complete annual allowance guide work through this; if a charge does arise, see how Scheme Pays and its deadlines work.

VAT: Why Most Private Medical Work Is Exempt (And When It Is Not)

Doctors often assume private fees attract VAT. For genuine clinical care they usually do not. 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 of the service is the protection, maintenance or restoration of the patient's health and the work is within your registered field. NHS GMS/PMS income is outside the scope of VAT altogether.

The exceptions are the watch-items, where the therapeutic purpose is thin or absent and the supply becomes standard-rated:

Purely cosmetic or aesthetic procedures with no therapeutic purpose (for example cosmetic-only Botox or fillers, and some aesthetic-clinic work).
Medico-legal and expert-witness reports, and other services whose primary purpose is to enable a third party to make a decision. These are taxable even though a doctor produces them.
Some occupational-health services and certain certification or administrative work with no real care element.

The threshold that matters is that only your non-exempt (taxable) turnover counts towards VAT registration. The registration threshold is £90,000 (raised from £85,000 on 1 April 2024) and deregistration is £88,000. A consultant whose private work is mainly exempt clinical care can run well past £90,000 of total private fees without ever needing to register, because the exempt portion does not count. It is the doctor whose cosmetic or medico-legal fees alone approach £90,000 who needs to watch the line. If you carry both exempt and taxable supplies and do register, you fall into partial exemption, which limits how much input VAT you can reclaim. For the full picture see our guide to VAT registration for doctors.

Keeping NHS and Private Expenses Apart

You cannot set private practice costs against your NHS salary. Private expenses (indemnity for private work, equipment, consulting-room hire, private secretarial support, professional fees relating to the private business) can only reduce private profit. NHS PAYE income stands on its own.

Some costs genuinely straddle both. Your GMC retention fee, your medical indemnity subscription (MDU, MPS or MDDUS) and relevant Royal College or specialty membership fees on HMRC's approved List 3 are deductible, and where they cover both NHS and private work they are apportioned on a fair and reasonable basis. A point specific to GPs: NHS general-practice clinical negligence in England is state-indemnified through the Clinical Negligence Scheme for General Practice (CNSGP) from 1 April 2019, so a GP's own paid indemnity is now mainly for private and non-clinical or regulatory cover.

Mileage between work sites is allowable at the HMRC approved rate of 55p per mile for the first 10,000 business miles in 2026/27 (up from 45p on 6 April 2026) and 25p a mile thereafter, though ordinary home-to-first-site travel is non-deductible commuting. A fuller list sits in our guide to claimable medical professional expenses.

Practical discipline matters here. Run private income through a separate bank account, keep digital records, and the year-end split is clean and defensible. That feeds directly into the next two points: payments on account and Making Tax Digital.

Payments on Account and MTD for Income Tax

The first self-assessment bill on a growing private practice is often a shock, because HMRC also asks for payments on account: two interim payments (31 January and 31 July), each 50% of the prior year's liability, due where the prior bill exceeded £1,000 and less than 80% was collected at source. NHS PAYE covers the salary, but the private profit is not collected at source, so the system front-loads tax on it. A year of rapid private growth can mean paying close to one and a half years of tax in a single January. Forecasting this avoids a cash-flow crunch.

Making Tax Digital for Income Tax is now arriving on a turnover basis. It applies to sole traders and landlords with qualifying income (gross trading plus property income, tested on the prior year) of £50,000 from 6 April 2026, then £30,000 from 6 April 2027 and £20,000 from 6 April 2028, replacing the old £10,000 trigger. Limited companies are outside it (MTD for Income Tax is not corporation tax), and general partnerships are deferred with no confirmed date. A salaried GP is not pulled in by employment income alone, but private earnings on top can take their qualifying income over £50,000. Most full-time private consultants and unincorporated private GPs are in scope from 6 April 2026 and need compatible software now.

When Private Income Is Large Enough for a Company

Once private profit is substantial, the question of a limited company comes up. The first thing to be clear about: incorporation is a private-work decision only. A company cannot hold an NHS GMS or PMS contract, and as covered above, company income and dividends are not NHS-pensionable. So this only ever concerns the private side, plus any PSC locum work that is outside IR35 (and note: IR35 has not been abolished, the off-payroll rules still apply to PSC locums, see our IR35 guide for locum doctors).

The tax mechanics for 2026/27: corporation tax is 19% on profits up to £50,000, 25% above £250,000, with marginal relief tapering between (an effective marginal rate around 26.5%). Extraction is by salary plus dividend, and dividend rates rose from 6 April 2026 to 10.75% ordinary, 35.75% upper and 39.35% additional (the additional rate is unchanged), with the dividend allowance at £500. (For 2025/26 the ordinary and upper rates were 8.75% and 33.75%.) That rise narrows the gap between taking profit through a company and simply paying income tax as a sole trader.

At typical private-income levels the pure tax saving from incorporating in 2026/27 is modest, and the dividend-rate rise erodes it further. The genuine drivers are usually managing the annual-allowance taper (routing private income away from pensionable pay can help), retaining profit inside the company, family-shareholder planning and asset protection, not a headline tax win. And every comparison has to be paired with the lost NHS pension accrual on income taken as dividends. We work the numbers through in our guide to medical practice incorporation step by step, and the trade-offs in limited company tax benefits and drawbacks for GPs.

A Quick Word on Selling Private Goodwill

One thing that does not apply to your NHS work: you cannot sell NHS GP goodwill. It has been prohibited since 1 April 2004 (currently under SI 2019/251), so the dentist-style "sell your goodwill and claim relief" playbook does not translate to NHS general practice. Private goodwill, built up in a genuinely private practice or a private-work company, is different and can be sold. On a qualifying disposal, Business Asset Disposal Relief applies at 14% for a disposal between 6 April 2025 and 5 April 2026, and 18% from 6 April 2026 (up from the historic 10%), against a £1m lifetime limit. The CGT annual exempt amount is £3,000 for 2026/27. The detail is in our guides to selling a private medical practice (CGT and BADR) and whether GP practice goodwill can be sold.

Where Specialist Advice Pays for Itself

Running an NHS post and private work together is exactly the scenario where generic tax advice goes wrong, because the pension interaction, the VAT carve-out and the incorporation trap are all specific to medicine. The right structure at £20,000 of private income is often the wrong one at £150,000, and a review before the tax-year end is far cheaper than fixing an annual-allowance charge or a missed payment-on-account after the fact.

Our specialist medical accounting services are built around doctors with mixed NHS and private income. If you want a clear read on how your two income streams fit together, what is pensionable and whether a company is worth it, get in touch.

Frequently asked questions

How is private practice income taxed alongside an NHS salary in 2026/27?: Your NHS post is taxed under PAYE with Class 1 National Insurance taken at source. Private work done as a sole trader is self-employment income reported on the SA103 self-assessment pages and is added on top of your NHS pay to decide which tax band the private profit falls in. Most consultants and GP partners are already higher rate (40% to £125,140) or additional rate (45% above £125,140) on their NHS pay alone, so private profit is usually taxed at the higher or additional rate from the first pound. Self-employed private profit also carries Class 4 National Insurance at 6% between £12,570 and £50,270 and 2% above (2026/27), and Class 2 is no longer a separate payment for profits above the small profits threshold from 6 April 2024.
Is my private practice income NHS-pensionable?: No. For a hospital consultant only the NHS employment is pensionable. Private work done as a sole trader, partnership or company is never NHS-pensionable, and income routed through a limited company and taken as dividends earns no NHS pension accrual at all. For GPs, NHS-derived profit is pensionable via the Type 1 Annual Certificate (partners) or the Type 2 self-assessment (salaried GPs), but private and non-NHS income sits outside that. Any tax saving from incorporating private work has to be weighed against this lost pension accrual.
Do I have to charge VAT on my private practice fees?: Genuine medical care by a registered doctor is exempt from VAT under VATA 1994 Schedule 9 Group 7, where the main purpose of the service is the protection, maintenance or restoration of the patient's health. The watch-items are purely cosmetic or aesthetic procedures with no therapeutic purpose, and medico-legal or expert-witness reports whose primary purpose is to help a third party make a decision, which are standard-rated. Only that non-exempt turnover counts towards the £90,000 VAT registration threshold (from 1 April 2024), so a doctor doing mainly exempt clinical work rarely has to register unless cosmetic or medico-legal fees alone cross £90,000.
Can I offset private practice expenses against my NHS salary?: No. Private practice expenses (indemnity for private work, equipment, room hire, secretarial support) can only be set against private practice income, not your NHS PAYE salary. Costs that genuinely cover both, such as your GMC retention fee, MDU/MPS/MDDUS subscription or relevant Royal College fees, are apportioned on a fair basis. Keep private practice money in a separate bank account so the split is clean if HMRC ever asks.
When should a consultant or GP put private work into a limited company?: Incorporation only ever applies to private work, because a company cannot hold an NHS GMS or PMS contract and company income is not NHS-pensionable. At 2026/27 rates the pure tax saving at typical private-income levels is modest, and the dividend rate rise to 10.75% ordinary and 35.75% upper from 6 April 2026 narrows it further. The real reasons are usually managing the pension annual allowance taper, retaining profit in the company, or asset protection, not headline tax. Always model the lost NHS pension accrual alongside any saving before deciding.

Get specialist advice for your situation

Every medical professional's tax situation is different. If you would like to discuss how this applies to your specific circumstances, fill in the form below and we will arrange a short introductory call.

Selling a Private Medical Practice: CGT and BADR Explained (2026 Rates)
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 why the rate stepping from 14% to 18% on 6 April 2026 turns disposal timing into a planning decision.