As a consultant, what is the best way to be paid?
Helping you make the right choice
It is important to know which legal structure is most appropriate for your private income.
There are four structures to choose from:
- Sole trader
- Limited liability partnership
- Limited company
By selecting the right legal structure for your private income you could:
- Divide your income with a spouse or civil partner
- Reduce tax rates to nil, 20% or 40% rather than 45% or 60%
- Reduce National Insurance contributions altogether
- Shelter income in a limited company where corporate tax rates are currently 19%.
- Help reduce the tax charge on the growth of your NHS pension
Should I be a Limited Company?
A limited company is not always the best choice for all consultants. The legal structure which is right for you depends upon your financial and personal circumstances.
‘Off payroll’ Working Rules (IR35)
The ‘off payroll’ working rules were introduced to the NHS from 6th April 2017.
NHS authorities must now consider whether these rules apply to anyone working for them through a limited company, an umbrella company, or an agency.
The practical outcome of these new rules means that it is now far less tax efficient for a consultant to work for a hospital, CCG or an NHS Trust through a limited company or an umbrella company.
We now generally recommend that a consultant working for one of these organisations opts to be paid through the organisation’s payroll. Utilising a limited company or umbrella company will result in a minimal or no saving.
We will discuss your circumstances before you accept a new appointment and let you know if the “off payroll” working rules will apply to you.
We will help you decide if there is any alternative to being paid in this manner.
If you do work through a limited company and are paid under the IR 35 (‘off payroll’ working rules) we will help you unravel your corporation tax and income tax returns and advise on any tax bills.
Consultants working together
We advise many consultants who work together in private practice. Often we will recommend they work through a Limited Liability Partnership (LLP).
LLP’s have several commercial and tax advantages:
- LLPs limit the personal liability of individual consultants.
- LLPs are very flexible. This is helpful in the allocation of profits and in tax planning.
- The partners or members of an LLP can be the individual consultant or a limited company controlled by the individual consultant. Again this can be very helpful in tax planning.
We advise on all accounting and tax aspects of limited liability partnerships. We also advise on LLP partnership agreements considering particularly the profit split between partners and expenses.
How we can help
We have considerable expertise and experience in this area. We have advised many consultants how to substantially reduce their tax bills by choosing the right structure.