Limited Companies


We now specialise in accounting and bookkeeping services for self employed healthcare professionals, including associates at clinics, locums, and home-based.

We regret that we are no longer able to provide an accounting and tax service to new clients practising through a limited company.

 

Limited Company or Self Employed?

A limited company is a totally separate entity in law and tax from the shareholder / director.
The limited company is legally distinct and has a separate tax system.

If you practise through a limited company, you are not “self employed” for legal and tax purposes, you are an employee of a limited company, for which you would usually be paid a salary.

You also would be a shareholder of that company, which may also pay you dividends, as a shareholder.

Most healthcare practitioners are truly self employed for legal and tax purposes, ie. no limited company involved.

Self employed people are also called “sole traders” by HMRC.

For a self employed person (sole trader), the business and the person are legally combined, they are “one” for legal and tax purposes, they are not separate. There is just one tax return.

Here are some aspects to consider when deciding to be just self employed (sole trader), or alternatively practise through a limited company:

  • Tax:  Limited companies and self employed people have different tax regulations – you can be better off or worse off depending on the circumstances – more below.
  • Accounting fees:  Limited company accounting fees are approximately three times that for self employed – more below.
  • Limited liability:  Limited companies provide some protection if the limited company goes bust – but self employed people are totally liable personally for their business’s debts.
  • Branding:  Some people think that a limited company is a better “look”.
  • Training fees:  Limited companies can claim tax relief for all sorts of extra training, but for self employed people the tax relief is restricted to development of existing skills.
  • Pension – Self employed people and limited companies have different options – more below.
  • Disclosure: Limited company accounts are filed on public record at Companies House, but self employed people’s accounts just go to HMRC and are not on public record.
  • Registered Office: A limited company must have a Registered Office address which is on public record. This can be your home or other suitable premises.
  • Student Loan: There may be reduced repayments if you practise through a limited company – more below.
  • Hassle: Limited company accounts and bookkeeping are more complicated – more below.

From tax year 2026/27, HMRC are introducing Making Tax Digital (MTD) for self employed people (not limited companies at this time). From 2026/27, some self employed people will be required to keep digital records and submit quarterly returns to HMRC – so like VAT but without making quarterly payments. If you keep bookkeeping records up to date it shouldn’t be a problem.

 

‘Paying’ yourself from your limited company

You would usually be ‘paid’ by a combination of salary and dividends, which will depend on your circumstances, eg. other income.

  • Salaries are taxed by Income Tax 20% (in the Basic Rate) / 40% (in the Higher Rate) / 45% (in the Additional Rate). Salaries are a deductible expense for Corporation Tax.
  • Dividends are taxed by Dividend Tax 8.75% (in the Basic Rate) / 33.75% (in the Higher Rate) / 39.35% (in the Additional Rate). Dividends are not a deductible expense for the Ltd.

 

Pensions

We are not authorised to advise on pensions but we can outline the tax aspects.

  • Pension – Self Employed: Self employed people get the 25% government top up to their pension, but do not get any tax relief on the pension payments they make unless they are a higher rate (40%) tax payer. Higher rate tax payers will get 20% tax relief on contributions broadly proportionate to the extent to which your total taxable income is in the higher rate band, although there are other aspects to this tax relief.
  • Pension – Limited Companies:  The limited company gets Corporation Tax relief on employee (you) pension contributions but neither the employee nor the limited company gets the 25% government top up.

 

Student Loans

Practising through a limited company may save student loan repayments because limited company profit is not taken into account for student loan repayments, just your salary and dividends. Whereas the whole of self employment profit is taken into account.

 

Corporation Tax – Limited Company

The starting rate for CT is 19% up to a profit of £50,000, rising to 25% for profits over £250,000.

 

Payments On Account

Self employed people with successful business are likely to start paying Payments On Account (POA) in the second or third year of being in business.

As an employee of a limited company, being ‘paid’ by salary and dividends, you are also likely to pay Payments on Account.

 

Why are accounting fees for limited companies more expensive?

In addition to a Profit and Loss Account (Income and Expenses), which is required for Self Employed people, limited companies also need to prepare a Balance Sheet (Assets and Liabilities) which must be filed on public record at Companies House.

This makes bookkeeping for limited companies more complex, because it is necessary to record not only the Income and Expenses, but also how and when everything was paid for eg. which bank account / credit card / cash etc.

Tax strategy is also more complicated for limited companies because the business owner (Shareholder) will also be a Director/Employee and usually will be paid a combination of dividend and salary.