Self-Employed vs Limited Company for Healthcare Professionals: Choosing the Best Structure For You

By Michael Kay, Director at Kays Accountants. Specialist in healthcare professional taxation and business structure planning. Last updated: December 2025

When you’re setting up as a healthcare professional — whether you’re a GP, dentist, physiotherapist, or any other practitioner — one of the very first decisions you’ll face is whether to operate as self-employed or as a limited company. Most accountants will give you a straightforward answer: limited companies are more tax-efficient. But for healthcare professionals, it’s rarely that simple.

NHS contracts, pension eligibility, and payment structures mean the “best” answer depends entirely on your situation. There’s no universal right or wrong, it’s about what works for you and what you want to achieve.

The Difference Between Self-Employed and Limited Company

Before we get into the healthcare complications, let’s cover the basics of self-employed vs limited company structures.

On paper, the difference between self employed and limited company structures seems purely financial. However, in reality, for healthcare professionals, it’s much more complicated.

Why NHS Work Changes Everything

Here’s where things get messy. If you’re doing any NHS work, your business structure isn’t just about tax efficiency — it’s about whether you’re even allowed to use a limited company.

The NHS Pension Problem

The biggest complication for healthcare professionals is the NHS Pension Scheme. If you want to pension your NHS earnings, you generally need to be paid as a sole trader, not through a limited company. This is because NHS pension eligibility requires you to receive income personally, with employer contributions processed through the NHS pension infrastructure.

For many doctors and dentists, the NHS pension is too valuable to give up. It’s a defined benefit scheme backed by the government, meaning you’re guaranteed a set income for life based on your salary and length of service. The NHS Business Services Authority provides detailed guidance on pension eligibility and contribution tiers, which range from 5.2% to 12.5% of your pensionable earnings depending on your income level.

So, even if setting up as a limited company for a doctors surgery could save thousands in tax, you might be stuck as self-employed purely to maintain your pension rights.

Why Some NHS Contracts Require Sole Trader Status

Beyond pensions, GP partnership agreements and some PMS/GMS contracts stipulate sole trader status in order to align with NHS pension scheme employer contributions. Salaried GPs employed by practices can’t operate through limited companies for that employment, though locum shifts outside core hours may allow it.

The frustration here is that you get all the downsides of being self-employed (higher tax rates, unlimited personal liability, less flexibility with income extraction) but you don’t even own your own practice in the traditional sense. You’re essentially locked into a structure that doesn’t suit you because of contract requirements.

If this is your situation, it’s worth having a conversation with an accountant about whether it’s genuinely worth continuing under those terms, or whether there are alternative arrangements you haven’t considered.

The Dentist Dual Structure: Running Both Self-Employed and Limited Company

Here’s where healthcare gets creative, and where many of our clients find the sweet spot. Many dentists — and increasingly other healthcare professionals — run two structures simultaneously.

How it works:

• NHS work is invoiced through you as a sole trader (to maintain pension eligibility and contract compliance).
• Private work is invoiced through a limited company (to benefit from lower corporation tax rates and more flexible income extraction).

For example, a dentist earning £50,000 from NHS patients (taxed at 40% = £20,000 income tax) also generates £40,000 private income through a limited company. The company pays 19% corporation tax (£7,600), leaving £32,400 post-tax profit in the company.

Here’s the key: instead of taking that £32,400 as dividends (which would trigger another £10,935 in dividend tax at 33.75% for higher-rate taxpayers), they leave the money in the company. By accumulating these funds year after year, they build up capital to eventually buy the practice outright or purchase the building — all while only paying 19% tax instead of the combined 54% they’d pay extracting everything personally.

This is why an associate dentist limited company structure has become so popular. It gives you the best of both worlds: NHS pension protection and tax-efficient wealth accumulation for long-term goals.

One practical consideration: professional indemnity insurance premiums differ by structure. MDU and MPS policies for limited companies typically cost more than sole traders cover, though the company can claim the premium as a business expense. Factor this into your tax savings calculation.

When Limited Company Makes Sense for Healthcare Professionals

If you’re not tied to NHS pension requirements or contract restrictions, a limited company often makes financial sense. Current HMRC corporation tax rates and dividend tax bands are published annually and can significantly impact your take-home income.

Here’s when incorporation typically works well:

Pure private practice: If all your income is private (no NHS work), you have complete freedom to choose your structure. A limited company for doctors running entirely private practices gives you:

• Lower tax rates (19-25% corporation tax vs 20-45% income tax).
• Flexibility in how and when you take money out.
• Ability to share income with a spouse through dividends.
• Limited liability protection (your personal assets are separate from business debts).
• More professional appearance when tendering for contracts.

Locum work: Many locum doctor limited company structures work well because locum income is often separate from core NHS employment. If you’re doing locum shifts on top of salaried NHS work, you can run those through a limited company without affecting your main employment pension.

However, you need to be careful about IR35 rules, which determine whether you’re genuinely self-employed or effectively an employee. Some hospitals and agencies won’t engage with personal service companies for this reason.

Building long-term wealth: If your goal is to accumulate funds to buy a practice, expand your services, or invest in equipment, keeping profits in a limited company is far more tax-efficient than extracting everything personally. Corporation tax at 19-25% beats income tax at 40-45% every time.

When You’re Better Off Self-Employed (Or Have No Choice)

There are scenarios where self-employment is either better or unavoidable:

• NHS Pension is Non-Negotiable: If maintaining your NHS pension is essential — and for many healthcare professionals, it absolutely is — then self-employment might be your only option for that income stream.
• Income is Under £50,000: The tax savings from incorporation become less significant at lower income levels. Once you factor in the additional accountancy fees and administrative burden of running a limited company, you might not actually be better off. Self-employment keeps things simple and costs down.
• No Spouse to Split Income With: One of the biggest tax advantages of a limited company is the ability to pay dividends to a lower-earning spouse. If you’re single or your partner is also a higher earner, this advantage disappears.
• Contract Terms Don’t Allow it: As mentioned earlier, GP partnership agreements, and some NHS contracts, explicitly require sole trader status. You have no choice in these situations.

Common Mistakes Healthcare Professionals Make with Business Structure

We see the same mistakes repeatedly:

1. Copying Somebody Else’s Setup Without Understanding Why: Just because your colleague uses a limited company doesn’t mean it’s right for you. Their NHS involvement, income level, family situation, and long-term goals might be completely different from yours.
2. Not Understanding NHS Pension Implications: Many healthcare professionals incorporate without realising they’re giving up pension eligibility on their NHS income. By the time they realise, they’ve lost years of pensionable service.
3. Taking Dividends When They Should be Accumulating: If your goal is to buy a practice in five years, extracting all your profits as dividends means paying 33.75% tax on money you’re just going to save anyway. Leave it in the company and only pay corporation tax until you actually need it.
4. Not Seeking Advice Before Signing NHS Contracts: Once you’ve signed a contract as a sole trader, switching to a limited company mid-term can be complicated or impossible. Get advice before you commit.
5. Thinking They Will Figure out the Tax Code Themselves: The UK tax code is over 20,000 pages long. Understanding the nuances of self employed and limited company structures, NHS pension rules, IR35, and dividend tax isn’t your job — it’s your accountant’s. Trying to DIY this usually costs significantly more in mistakes than you’d ever save in fees.

Common Questions About Healthcare Business Structure

Can I use a limited company if I work for the NHS? It depends on your contract and whether you need NHS pension eligibility. Salaried NHS employees can’t invoice through a limited company for their employment. However, locum work, private practice, or additional services can often go through a limited company. Check your specific contract terms and pension requirements before deciding.

Will I lose my NHS pension if I incorporate? You can’t pension income that’s paid to your limited company. If you’re running a dual structure — self-employed for NHS work and limited company for private work — you maintain pension eligibility on the NHS income paid to you personally as a sole trader.

What’s better tax-wise: sole trader or limited company? For income over £50,000, limited companies usually save tax through lower corporation tax rates (19-25%) versus income tax (40-45%). However, for healthcare professionals, NHS pension value often outweighs tax savings. The calculation depends on your total earnings, family situation, and long-term goals.

Do dentists really need two structures? Many associate dentists run dual structures because NHS contracts require sole trader status for pension eligibility, while private work benefits from limited company tax efficiency. It’s more complex administratively, but the tax savings and pension protection often justify it. Your accountant can manage the dual structure for you.

Can I switch from sole trader to limited company later? Yes, but timing matters. Switching mid-contract can create complications with NHS payments and pension records. Plan the transition at a natural break point (contract renewal, tax year end) and get professional advice to ensure pension continuity and proper HMRC notification.

How to Choose the Right Structure for Your Practice

Here are the questions you need to ask yourself:

What percentage of your income is NHS vs private? If it’s 100% NHS with pension requirements, you’re likely stuck as self-employed for that income. If it’s mixed, a dual structure might work. If it’s 100% private, a limited company is probably better.

Do you need to maintain NHS pension eligibility? This is often the deciding factor. The NHS pension is valuable enough that giving it up for tax savings rarely makes sense unless you’re earning significantly more from private work.

Are you planning to buy a practice or building? If yes, accumulating funds in a limited company is far more tax-efficient than saving personally after paying income tax on extracted profits.

What are your long-term goals? If you want to build a multi-practitioner practice, a limited company provides a better structure for growth, hiring, and eventually selling the business.

Do your NHS contracts stipulate a specific structure? Check the fine print. GP partnership agreements and some PMS/GMS contracts explicitly require self-employment.

Why You Need Specialist Healthcare Accounting Advice

The difference between limited company and self employed structures isn’t just about tax rates. For healthcare professionals, it’s about NHS pensions, contract compliance, dual structures, and long-term wealth planning.

Generic business advice doesn’t cut it. You need an accountant who understands:

• NHS pension scheme rules and eligibility.
• How to structure dual arrangements for NHS and private work.
• IR35 implications for locum work.
• Contract requirements that might restrict your options.
• How to accumulate funds tax-efficiently for practice purchases.

At Kays Accountants, we work with healthcare professionals across the UK who are navigating exactly these complications. When you choose us to manage your accounts, myself and my fellow director Steven will work to thoroughly understand your practice, your NHS involvement, and your personal financial goals, then create a tailored plan that makes sense for your situation — not just copy what somebody else is doing.

If you’re already operating and wondering how to manage tax throughout the year, read our guide on setting aside tax funds for your healthcare practice.

This isn’t about telling you there’s one “right” answer. It’s about understanding your specific circumstances and finding the structure that works for who you are and what you wish to achieve in the future.

You can book a free consultation here, or give us a call if you’d rather talk it through: 0161 399 8516.