Is there an income level where a company starts to make sense?

There is no threshold that works as a rule of thumb, and anyone quoting one is guessing. It depends on how much profit you actually leave in the company, what your other income already is, and how many of your engagements are caught by the off-payroll rules.

Can I close a company down if it stops being worth it?

Yes, and it is often the right answer. There is a process and a cost to doing it properly, but running a company out of inertia costs more over a few years than closing it does once.

Does VAT change if I use a company?

The registration threshold applies to the entity making the supplies, so it follows the business rather than the structure. What matters more for doctors is which of your work is exempt in the first place, and HMRC updated its published view on the VAT treatment of supplies of registered locum doctors on 17 July 2026, so this is not a settled area to guess at.

Sole Trader or Limited Company for Doctors

Written and reviewed by the Medical Accountants editorial team. Last reviewed 24 July 2026.

The answer changed on 6 April 2026 and most published comparisons have not caught up. Dividend rates went up by two percentage points in the basic and higher bands, which narrows the gap that made a company worth the trouble in the first place.

For a doctor there is a second factor that usually matters more than the arithmetic, which is who your clients are.

What a Company Actually Changes

Profits are taxed on the company rather than on you. The small profits rate is 19% up to £50,000, the main rate is 25% over £250,000, and marginal relief applies between the two, as set out in HMRC's corporation tax rates guidance. Both limits are divided by the number of associated companies, so a second company anywhere among the people connected to you changes the rate.

You are then taxed personally on what you take out, as salary or as dividends. The saving, where there is one, comes from the gap between those two layers and one layer of income tax plus Class 4 National Insurance on the same profit.

The April 2026 Dividend Increase

The dividend allowance is £500. Above it, dividends are taxed at 10.75% in the basic rate band, 35.75% in the higher rate band and 39.35% above that. The first two each rose by two percentage points on 6 April 2026.

For a doctor this bites harder than for most, because a consultant or a GP partner is normally already in the higher or additional band before the company distributes anything at all. The relevant rate is almost never the basic one, so a comparison that starts there is describing a situation you are not in.

Off-Payroll Working Removes Most of the Benefit

Where your client is a public authority, the client decides your employment status and you do not. NHS trusts, foundation trusts and integrated care boards are public authorities: they appear in Schedule 1 of the Freedom of Information Act 2000, which is the definition the off-payroll rules use. Size makes no difference for a public authority.

Where a determination puts you inside the rules, tax and National Insurance come off before the money reaches your company, so the company receives an amount that has already been taxed. Run enough of your work that way and the company is administrative cost with no return. Where the client is a small private company, the decision comes back to your own company instead.

The Costs on the Other Side

Statutory accounts, a corporation tax return, a confirmation statement, payroll if anyone is paid, and dividend paperwork that has to exist before the money moves rather than be written up afterwards. Accountancy fees are higher because there are two sets of filings rather than one.

None of that decides it on its own, but it is the part people leave out of the comparison. If you are weighing this up, our company accounts service covers the ongoing side and the locum accounts page covers the alternative.