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. Many consultants we onboard are surprised to find that HMRC is owed significantly more than expected, either because private income was not factored into their payment on account calculation or because their tax code did not reflect additional income.

Incorporating your private practice into a limited company can reduce your income tax and National Insurance if the following conditions broadly hold: your private income is consistently above £80,000-£100,000 per year, you have a non-working or lower-earning spouse or adult child who could be a shareholder, and you have flexibility over when you draw income from the company.

The company pays corporation tax at 25% (for profits above £250,000; smaller profits attract relief). You can then draw a low salary (reducing NI) and take the remainder as dividends taxed at lower rates than employment income. The differential between employment tax rates and dividend rates provides the saving.

However, private practice income remains outside the NHS Pension Scheme regardless of whether it is paid personally or through a company. This is an important consideration: if growing your NHS pension is a priority, keeping private income personal and managing the tax position differently may be a better strategy. We model both approaches at your actual income levels.

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 is approaching £90,000 from taxable activities, we assess the position and register for VAT if required.

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. We model the lifetime pension value comparison before recommending it.

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.