Vicky Garbett is Chief Financial Officer (CFO) at Designated Medical, and leads the accounting, finance and billing teams. A fully qualified Management Accountant, she helps doctors with their finances, and setting up profitable and successful private practices.

Here Vicky shares her expertise on ‘How UK Doctors Can Pay Less Tax in 2025-2026’.

What taxes do doctors need to be aware of?

As a UK doctor, you need to be aware of several types of tax, including:

• Income Tax – Basic (20%), Higher (40%), Additional rate (45%)
• National Insurance (NI)
• Pension Tax
• Capital Gains Tax (CGT)
• Dividend Tax (if you have investments or a limited company)
• VAT (many medical services are exempt)
• Self-Assessment Tax Return (31st January submissions)
• Corporation Tax (9 months after Year End)

What were the key November 2024 budget takeaways?

• Employer National Insurance (NI) Contributions will be increased to 15% from April 2025
• Employers to start paying NI for employees at £5,000 compared to current £9,100
• Impact: a 3% increase on all staff costs
• Inflation is currently running between 2.5% to 3% in the UK
• Employee pay rises may be limited with many companies using profits to counter increased corporate tax burden
• Employers considering redundancies and/or replacing full-time employees with more part-time staff or contractors

Corporation tax and capital allowances:

• Corporation tax will stay at 25% for the remainder of this Parliament (previously 19%)
• For a company making £100,000 profit, in broadest terms the tax liability has gone from £19,000 to £25,000

BUT is this all bad news?

• For capital allowances, full expensing will be maintained along with the £1m Annual Investment Allowance
• The Government will also consult on the tax treatment of pre-development costs
• Exploring the extension of full expensing to assets bought for leasing, when fiscal conditions allow

Plant and machinery qualify for AIA and includes:

• Business cars and vans
• Computers and office equipment
• Heating, lighting, lifts, air-conditioning, fitted kitchens, fire alarm and CCTV systems
• Costs of demolishing/altering plant and machinery

Effective Pension Planning

How to optimise your tax savings:

• Contributions from your limited company into your pension are classed as a business expense
• You don’t pay income tax or national insurance contributions to your pension, but you do on salary or dividends
• Directors can pay £60k tax free (income under £200k) into their pension and reduce corporation tax
• £60k per director per year can be carried back 3 years
• Income over £200k comes with a tapered allowance

Company Cars

You can claim one of the following:

• The full value of the car as 100% first-year allowances
• 18% of the car’s value (main rate allowances)
• 6% of the car’s value (special rate allowances)

When you purchase the car, its CO2 emissions determine the rate you can claim.

Car Benefits in Kind (BIK)

• Benefit in Kind (BIK) for electric vehicles (EVs) will increase over the next 5 years
• BUT, it’s staying much lower for EVs than for petrol, diesel, and hybrid vehicles
• For non-EVs, it’s increasing quite dramatically

Limited companies and tax benefits

• Director Payroll and/or Dividends
• Director Life Insurance
• Company Car (BIK)
• Director Medical Insurance (BIK)
• Director Pension allowance
• Salary Sacrifice Schemes
• Cycle to Work Schemes

Summary – tips for smarter financial planning

• Pension/Investment options
• Legal structure – limited company
• Maximise tax allowances and reliefs
• Use tax-efficient investment strategies
• Plan smartly for high income scenarios

Next steps…

Speak to the Designated Medical Team

We offer a free 45-min consultation with our expert team, who will provide you with help and guidance setting up your private practice.

Join our community of practitioners on WhatsApp who are moving into private practice and share ideas and knowledge.

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