Consultant Private Practice Tax: A Complete Guide

Private patient fees earned directly by a consultant (not through a company) are taxable as self-employment income on self-assessment. They do not go through the same PAYE system as your NHS salary. This means you are responsible for declaring them on your tax return, paying Class 4 National Insurance contributions (6% on profits between £12,570 and £50,270, 2% above) and making payments on account twice annually.

The combination of NHS PAYE income and self-employment private practice income affects your overall marginal rate and your payment on account schedule. A bill that comes in larger than expected usually has one of two causes: private income was never factored into the payment on account calculation, or the PAYE tax code on the NHS salary did not reflect the additional income.

Whether incorporating your private practice helps depends on the mix of your income and on how much you draw versus leave in the company, not on reaching a particular level of private earnings. The company pays corporation tax at 19% on profits up to £50,000 and 25% on profits above £250,000, with marginal relief between. Taking that profit out then costs dividend tax at 10.75%, 35.75% or 39.35% for 2026/27, after a £500 dividend allowance. The two together have to beat what the same profit would cost taken personally: income tax at 20%, 40%, or 45% above £125,140, plus Class 4 National Insurance at 6% and 2%. The dividend rise on 6 April 2026 narrowed that gap.

What moves the answer is a shareholder structure that allows income splitting, the ability to leave profit in the company rather than drawing all of it, asset protection, and routing private income outside pensionable pay to manage the annual allowance taper. Against any saving sit company filing costs and director duties.

Private practice income remains outside the NHS Pension Scheme regardless of whether it is paid personally or through a company. If growing your NHS pension is a priority, the accrual given up belongs in the comparison, and keeping private income personal may be the better route. The private practice incorporation calculator at /calculators/private-practice-incorporation runs both routes on your own figures.

Income from expert witness reports, medico-legal assessments, and court appearance fees is self-employment income, not employment income. It sits on self-assessment schedule D (trading income), attracts Class 4 NI, and has its own allowable expense profile.

HMRC's position on VAT for medico-legal work has evolved. Pure expert witness services (preparing reports for use in legal proceedings) are generally exempt from VAT as medical services. However, some advisory or investigative services that do not meet the narrow definition of a medical service for healthcare purposes may be taxable. If your medico-legal income from taxable activities is approaching the £90,000 VAT registration threshold, the split between exempt and taxable work needs assessing, and registration is due within 30 days of the end of the month in which the threshold is crossed.

Allowable expenses for medico-legal work include: proportion of professional indemnity covering medico-legal activities, specialist software, dictation equipment, home office proportion, and motor travel for appointments.

Your NHS Pension Scheme membership is based on your NHS employment. Private practice income does not contribute to your NHS pension entitlement regardless of how it is paid.

However, private income significantly affects your annual allowance position. High private income increases your threshold income and adjusted income, potentially pulling you into the tapered annual allowance even if your NHS pension growth alone would not. If you are also growing your NHS pension through substantial pay increases, the combination can generate significant annual allowance charges.

Some consultants with high private income choose to reduce or cease NHS Pension Scheme membership (opting out) and direct pension saving to a personal pension or SIPP. This is a significant decision with long-term implications, and the lifetime value of the NHS benefits being given up should be modelled against the alternative before it is made.

Consultants working privately (whether personally or through a company) can claim a range of expenses that are often under-claimed:

Professional indemnity: MDU, MPS, or MDDUS premiums attributable to private practice activities. If you have a single indemnity policy covering both NHS and private work, the private proportion is claimable.

Royal College subscriptions and GMC retention: fully allowable.

CPD and conference costs: travel, registration, accommodation for medical education events. Claimable for private practice activities.

Consulting room costs: if you consult from home, a proportion of relevant costs is claimable. If you use a private hospital's rooms and pay a facility fee, those fees are a direct business expense.

Travel: mileage between NHS base and private hospitals, to medico-legal appointments, to educational events. Home-to-NHS-base travel is not claimable.