NHS Financial Planner

NHS Private Practice & Mixed Income Guide

Complete tax and pension planning guide for NHS consultants and GPs with private practice income, medical-legal work, and multiple income streams.

Last updated: 2025-07-22
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Common NHS Mixed Income Structures

NHS + Private Practice

  • • NHS consultant role (PAYE)
  • • Private clinic sessions
  • • Private hospital work
  • • Insurance examinations

NHS + Medical-Legal

  • • NHS substantive post
  • • Expert witness work
  • • Medico-legal reports
  • • Court appearances

Multiple Streams

  • • NHS employment
  • • Private practice
  • • Locum work
  • • Teaching/Training
  • • Research grants

Tax Structure Options Comparison

StructureNHS Pension EligibleTax TreatmentBest For
Sole Trader
Direct invoicing as individual		❌Income Tax + NISimple setup, low income
Limited Company
Incorporated business		❌Corp Tax + Dividend TaxHigher income, tax efficiency
Partnership
With other practitioners		❌Income Tax on profit shareShared expenses, equipment
LLP (Limited Liability Partnership)
Professional partnership		❌Income Tax on profit shareLarge practices, limited liability

Pension Strategy with Mixed Income

Annual Allowance Management

NHS Pension Growth

NHS pension growth counts towards your £60,000 annual allowance. This includes:

  • • Automatic employer contributions
  • • Your employee contributions
  • • Benefit improvements (salary increases, promotions)
  • • Additional voluntary contributions (AVCs)

Private Practice Pension Contributions

Private income pension contributions also count towards annual allowance:

  • • SIPP contributions from private practice profits
  • • Executive pension schemes
  • • Stakeholder pension contributions
Critical: Combined contributions from ALL sources cannot exceed £60,000 without tax charges.

Limited Company Tax Strategies

Optimal Salary Strategy

2025/26 Optimal Director Salary

Pay salary at National Insurance threshold to maintain NI credits while minimising tax:

Annual salary:£12,570
Income tax:£0
Employee NI:£0
Employer NI:£0

Dividend Tax Efficiency

2025/26 Dividend Tax Rates

Dividend allowance:£1,000
Basic rate (8.75%):Up to £50,270
Higher rate (33.75%):£50,271-£125,140
Additional rate (39.35%):Above £125,140

Tax-Deductible Business Expenses

Professional Costs

  • • GMC registration fees
  • • Royal College memberships
  • • Professional indemnity insurance
  • • CPD courses and conferences

Equipment & Technology

  • • Medical equipment
  • • IT equipment and software
  • • Office furniture and supplies
  • • Website and marketing

Travel & Premises

  • • Home office costs
  • • Travel between sites
  • • Clinic rental costs
  • • Utility bills (business portion)

Common Annual Allowance Scenarios

Scenario 1: Conservative Strategy

NHS Employment

  • • NHS pension growth: £45,000
  • • No additional AVCs
  • • Focus on career progression

Private Practice

  • • SIPP contribution: £15,000
  • • Total annual allowance used: £60,000
  • • No tax charges

Scenario 2: High Growth Year

NHS Employment

  • • NHS pension growth: £70,000 (promotion)
  • • Exceeds annual allowance by £10,000
  • • Consider Scheme Pays

Private Practice

  • • No additional pension contributions
  • • Use carry forward if available
  • • Plan future contributions carefully

Scenario 3: Tapered Allowance

High Total Income

  • • Combined income over £260,000
  • • Reduced annual allowance
  • • Complex tax planning required

Strategy Options

  • • Salary sacrifice arrangements
  • • Timing of private practice income
  • • Spouse pension contributions

Income Smoothing & Tax Planning

Timing Strategies

  • •
    Invoice Timing: Control when private income is received across tax years
  • •
    Expense Timing: Accelerate deductible expenses in high-income years
  • •
    Pension Contributions: Time large contributions to manage annual allowance

Corporate Strategies

  • •
    Profit Retention: Retain profits in company for lower tax years
  • •
    Dividend Planning: Optimise dividend payments across tax years
  • •
    Equipment Investment: Use annual investment allowance effectively

Professional Advice Strongly Recommended

Mixed income strategies can be complex and have significant long-term financial implications. Consider professional guidance from:

  • • Specialist medical accountants familiar with NHS pension rules
  • • Independent financial advisers with healthcare sector experience
  • • Tax specialists for complex annual allowance planning
  • • Legal advice for partnership and incorporation structures

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