GP practice incorporation – Should GPs consider this?

The question of whether GP practices should convert from a traditional partnership model to a limited company has become more common in recent months.

GP practice incorporation – Should GPs consider this?

The question of whether GP practices should convert from a traditional partnership model to a limited company has become more common in recent months, largely driven by increasing personal income tax rates for higher‑earning GPs.

In many other professional sectors, incorporation offers two key benefits: tax savings (often via the sale of goodwill) and the protection of limited liability. The tax benefits associated with selling goodwill are not available to GPs. Unlike dentists – who are permitted to sell goodwill and often incorporate to take advantage of favourable tax rates – GPs are prohibited from selling goodwill under NHS contract rules.

Why incorporation rarely works for GP practices

Despite the rise in conversations about incorporation, there are several significant drawbacks that usually make the limited company structure unsuitable for GP partnerships:

Potentially higher overall tax and National Insurance contribution (NIC) liabilities, even when using a dividend‑heavy remuneration strategy (which itself creates challenges).
Reduced NHS pension benefits, as pensionable profits must be calculated on post‑corporation‑tax profits, lowering the pensionable figure.
Difficulty transferring the patient list to a new company, which may not be approved by the relevant NHS authority.
Tax implications when transferring practice property, with potential exposure to Capital Gains Tax (CGT) and stamp taxes on incorporation.
Complications with leased premises, as landlords may not consent to assign the lease to a newly formed company.
Higher employer NIC costs where GPs draw remuneration as salary rather than dividends.
More complex succession arrangements, as incoming and outgoing partners would need to buy and sell shares rather than adjusting capital and current accounts.
Reduced privacy, because company accounts must be filed at Companies House and become publicly accessible.
Tighter rules on allowable expenses, as GPs operating through a company become employees, with less generous expense rules compared to self‑employed status.

Can it work?

There are some situations where a limited company can be useful for GPs to use – e.g. putting high non-NHS private income via a company and not drawing it all out immediately as salary or dividends provides an initial tax deferral and likely tax saving overall.

How common is incorporation for GP practices?

A recent study found that very few GP practices across the UK operate as limited companies. The very small number highlights a simple conclusion: the limited company structure is generally not well suited to the operational, contractual, and financial realities of GP practices.