7 Limited Company Mistakes UK Doctors Make — And How to Fix Every Single One

As a doctor with a limited company, are you making the most of it? Or are you making one of these 7 mistakes that I'm going to show you now? And I'll show you how to avoid them as well. I'll start with a quick story because that helps to drive the message home. And if you stay until the end, I've created a free checklist to help you review your own limited company as a doctor to check whether you're making the most of it. Okay. You can skip ahead now and download it. It doesn't matter, but you may miss some of the most valuable points in the middle. So might as well just watch the whole thing. It's a good investment. Let's dive in. So a few weeks ago, after I had spoken at a conference, I was invited to go speak at this conference, a national conference, and a doctor walked over to me to speak with me. She wanted to pick up a copy a signed copy of my book, The Money Wise Doctor, which I was very happy to sign for her. I love signing books at conferences. Now, she was a local GP, very smart doctor, experienced doctor. She already had a limited company. She told me she had binge-watched several of my videos and that they had helped her spot gaps in her tax efficiency, investing, and wider financial strategy. Of course, I was pleased when she said that. But then she asked me one question. She said, Andy, I've had my limited company for more than a year. So money comes in, my accountant files the account. So she was a partner before she became a locum. My accountant files the account, but every time I try to take money out, I feel as though I'm being taxed all over again. So what's the point? What am I missing? Okay.

Right.

So when you hear that question, you know, you're ready to do some explanation. So on paper, everything looked organized. The company was registered with Check Companies House. She had an accountant. I don't know if they were specialists or not. She had a business bank account. She was invoicing clients. But during our brief conversation, it just took a couple of minutes, and one thing became immediately clear. She had created a limited company, done the paperwork, but nobody had explained properly how to operate one efficiently without leaving money on the table. She knew about salary. She knew about dividends, but several other areas had never been discussed, and she was missing out thousands, if not tens of thousands of pounds every single year because she had no idea about employer pension contributions, business protection, equipment expense, the difference between business spending and personal spending, and how to plan the way the money leaves the company so that it's very tax efficient. So you have to make a plan about how to extract the money from the company. Just don't just take it randomly. And this is a pattern I see repeatedly among doctors. Doctors do the hard part, you know, they do the work, they create the company, then they do the work itself, they generate the income, then they don't really use the company to the full advantage. They might use one or two of the tools available, at most 3. So in this video, I want to show you 7 common mistakes, and these are opportunities you can actually correct. 7 common mistakes doctors make after opening a limited company and how to avoid them. 7 common mistakes doctors make with a limited company, and these are not secret loopholes, these are not tricks for beating or cheating HMRC. They are legitimate areas worth understanding and where necessary, if needed, discussing with a suitable accountant, tax advisor, or financial advisor. I'm Dr. Andy Egwim. I'm a former salaried NHS GP. I'm an investor for more than 20 years now, so 21 years as an investor. I'm the founder of moneywisedoctor.com. I've operated limited companies for close to 10 years now in the UK, 9 years and 9 months Through Moneywise Doctor also, we've helped about 4,400 doctors to understand tax efficient investing, pensions, investing, you know, sort of like to boost their confidence around managing money and make smarter financial decisions. But look, this video is not financial advice, for general educational purposes only. I'm not your accountant or tax advisor, solicitor, or anything like that. Nothing here is personal financial, tax, or legal advice. Company and employment pension and tax rules change all the time, but the right approach depends on your wider income, family circumstances, business activity, and long-term goals. So please seek appropriate professional advice before acting if you need to. This video also assumes that your company is carrying out genuine business activity. Whether you should have a limited company in the first place is a separate question. I've covered that in a previous video using IR35, my plumber, as an example. If you haven't watched it, just go over and watch it first. Watch that first if you're unsure whether a limited company is right for you or not. But I'm assuming that if you're watching this, you already know it's right for you or you've got one already or are planning to start one.

If you're wondering if a limited company is right for you as a doctor or physiotherapist or healthcare professional, maybe a medic doing some locums or have some side gigs, a limited company could save you thousands, but it's not for everyone. Now, my free guide explains based on my own experience and from research When to consider a limited company, the pros and the cons, how it works for doctors and healthcare professionals, and you can get it all for free. So get your free guide with the link in the description. Now let's jump right back to the episode.

Now we've got that out of the way, let's look at the 7 mistakes. Number 1 is paying yourself without considering your other income. The first mistake is assuming that there's one perfect combination of salary and dividends for every company director. Nope, there's not. Suppose you already earn a big NHS salary, let's say a full NHS salary. Your personal allowance may already be fully used. So you may already be paying a higher rate tax already from your salary job. You may even be close to £100,000 adjusted net income and be at risk of falling into the 60% tax trap. At that point, you started losing your personal allowance. Now, taking more salary from your company could add to your taxable income and create further PAYE and National Insurance liability. More consequences. For example, imagine your adjusted net income from your NHS work is already around £100,000. You then receive more salary from your limited company. Let's say you receive £12,570. You also have rental income and maybe some bank interest, dividends, or income from another professional role. Those amounts can push your adjusted net income higher and may move you further into the 60% tax trap. So instead of becoming more tax efficient, you may accidentally make your position worse. Yes, end up paying more. At this point, some people say, well, I'll simply just take dividends. Why bother? I'll not take a salary. This is why it's important to understand what you're doing, because dividends are not tax-free. In fact, for this tax year, 2026/27 tax year, the dividend allowance is still £500. Dividend income above that amount is taxed according to your wider income tax band. So the current rates are 10.75% for basic rate taxpayers— it was recently increased— 35.75% for a higher rate taxpayer, and 39.35% for additional rate taxpayers. So your wider income determines which rate applies. And dividends can only be paid from distributable company profits after corporation tax. Now, consider a doctor in a different scenario altogether. Her limited company is her only source of income, so she's a full open, works outside the IR35. For that person, taking some salary may help them use up their personal allowance or build a National Insurance record. So she might take £12,570 and pay zero tax. So the answer depends on the whole picture. Your NHS salary, your private income, your rental income, your pension contributions, your student loan, Child benefits, savings interest, other dividends, company profit, and how much money you actually really need to withdraw because you've still got to live. Now, the mistake is not taking salary. That's not the mistake. The mistake is copying a number for salary from TikTok or YouTube or from another company director without understanding what works for them and your situation. So your extraction strategy should be planned, documented, and reviewed.

Okay.

Mistake number 2 is ignoring employer pension. Now, this is one of the most valuable areas many company directors overlook. Pension. A limited company can make an employer pension contribution directly into a registered pension for a director as big tax savings. That's different from paying the money to yourself first and then contributing from your personal bank account into your personal pension. A company contribution may be deductible for corporation tax where it is made wholly and exclusively for the company's trade and meets the relevant conditions. Now, but this does not mean that the company can simply pay any amount without consequence. You must consider your total pension Pension input for the tax year because you still have only one allowance, £60,000 this year. That includes contributions to personal pensions and the pension input value of defined benefit schemes like the NHS pension. So your workplace pension. You must also consider the standard annual allowance, any tapered annual allowance, and any carryforward unused pension allowances from previous years. And also whether you've triggered the money purchase annual allowance. More on that in a later video. Look at your NHS pension growth as well and whether the contribution is reasonable in relation to the company's activities. Now, The standard annual allowance is currently £60,000 for 2026/27 tax year, but that does not mean every director automatically has £60K of unused space available. Your pension input across all schemes has to be factored in. I've seen doctors focus entirely on taking every pound out as salary or dividend while leaving the employer pension. It's leaving money on the table. So that's an opportunity to build financial independence because you can invest Imagine your company being able to invest a meaningful sum into your pension each year, and then, you know, that money can then be invested long-term for your financial future. Of course, the amount must be affordable for the company and appropriate for your pension position. So don't only ask, how much can I take out of the company? You also need to ask, how much could the company invest for the future me? Because sometimes people rush to put in money. into the account and then invest in an ISA. So this could be more tax efficient, depending on your situation. Number 3, paying personal life insurance from taxed income without reviewing alternatives. So many company directors pay their personal life insurance premiums from their own bank accounts. That means the money may have already passed through corporation tax and then personal extraction taxes before the premium is paid. Think about a relevant life policy. It's a type of employer-arranged life cover that may be suitable for some directors and employees. I've had one like that for years. It's not the same as an ordinary personal life insurance policy, but it does do about the same thing. It must meet specific conditions. It's commonly written under an appropriate trust if you specify, and it should be arranged correctly from the beginning. Now, this is not something to buy from a random online advert because somebody called it tax deductible. You want to speak to a regulated protection advisor specialist who understands company directors and relevant life arrangements. You can check out Moneywise Dr. The mistake is not necessarily having personal life insurance. The mistake is never checking whether the way you fund your protection still suits your current business structure to be tax-efficient. And remember that relevant life cover is not the same as income protection, critical illness cover, shareholder protection, or key person insurance. These are all a little bit different. They are very different. Each one solves a different problem. Now, mistake number 4. Buying a car personally without comparing the company route. I remember a doctor in one of our tax X-ray workshops suddenly exclaiming when I mentioned this point. She had recently bought an electric car costing her about £50,000. Now, she needed it, partly, mostly for traveling for her locum appointments. Okay, this is a doctor, she's a consultant psychiatrist, but she had bought it personally. When we discussed the possibility of a company vehicle, I mean, an electric car, she asked, Why did nobody tell me about this before now? I bought it the previous week. Well, you don't know what you don't know. Okay? That's why I try to make these videos. Stay with me. And those hidden blind spots can become expensive. Okay? If you find out late. Electric companies, electric cars actually could be bought through the company. I could actually have like 100% tax capital allowance. So that's something to think about. But don't oversimplify it. You may hear buy the electric car through the company and claim the whole thing. It's not that simple. You need to get the right information and do it properly. You need to compare a number of things like the purchase price, whether the vehicle is— are you going to buy it or lease it? Are there any capital available, capital allowances? How about the corporation tax, the benefit-in-kind charge, employer national insurance? Would you use it for your private stuff? Insurance, charging costs. Business mileage. What happens when the car is sold? And the personal tax cost of extracting enough money to buy it outside the company. So you have to weigh those 2 things. Okay. So a company car available for private use generally creates a taxable benefit. That's benefit in kind. And the value depends on factors including the car's list price, fuel type, and emissions. Of course, this one is electric. For one doctor, the company route may be attractive to buy an electric car. For another, keeping an existing personal car and claiming allowable business mileage may more sensible. So your situation might be different. Don't buy an expensive vehicle simply because somebody described it as tax deductible. Compare the total cost under both routes. The car should make sense before the tax relief. Okay, so tax treatment should improve a good decision, not justify a bad one. Now, mistake number 5, paying family members without treating them as real employees. A spouse, an adult child, or other family members can work for the company. Nothing wrong with that, but the work must be genuine. The pay must be commercially reasonable for the work actually completed. Look, if you pay your 18-year-old £100,000 a year for a few hours of basic administration, HMRC may become very interested in how you reached that figure. The company must operate The arrangements properly. So make sure you do things properly. That means a genuine role, there's actual work, there's appropriate pay, there's clear records, there's payroll where required, and employment law responsibilities, and evidence that the payments were made. You cannot simply put a relative on the payroll because they have unused personal allowance. But if your spouse genuinely handles bookings, administration, invoices, diary management, social media, or another necessary part of the company, paying them a reasonable market rate may be legitimate. The principle is simple. Pay for real work, pay a reasonable amount, and keep the evidence. Mistake number 6, mixing personal spending with genuine business expenses. Now, this is one of the most common mistakes new company directors make. A company bank card is not a second personal current account. I mean, that sounds obvious, and I'll show you why. Okay? It's not a personal— but company spending and personal spending can become blurred very quickly. A laptop genuinely required for the company may be a legitimate business expense. A mobile phone contract held by the company can be treated differently from the company paying your personal phone bill. Now, home working equipment also has specific rules around them. Travel must be genuinely business-related. Entertainment has restrictions, and clothing is often misunderstood. And when the company pays a private expense, that payment may need to be treated as salary, taxable benefit, or a director's loan rather than an ordinary business expense. So you have to understand what is allowable. Okay, the test is not, can I pay for this, you know, with my business card? No, it's— you may be able to pay for that, but the real question will be, what is the business purpose? Can you— is this really a business expense? Is it allowable? Is it wholly exclusively for your business? And is it reasonable? And how should it be recorded? Now, a messy director's loan account can create tax consequences and unnecessary problems with your accountant. So keep business and personal finances separate. Keep receipts, add notes when you transfer explaining the business purpose, and review the records regularly rather than trying to reconstruct 12 months of spending just before the accounts are due and your accountant is giving you dirty stares. Number 7, not taking adequate business protection. Now, the 7th mistake is rarely talked about. Many doctors understand personal life insurance, Far fewer of us have considered what happens to the company if you cannot work. Imagine you are the company's main income generator, as many doctors' locum companies are. If you become seriously ill, revenue stops, and nobody hopes for that, but the company costs may continue. Software— if you have staff, they still get paid. Accountancy, premises, professional subscriptions, loan commitments— there are different forms of business protections for these risks. to consider. Key person cover, shareholder protection, relevant life cover, business loan protection— they are not interchangeable, and they're not all treated the same way for tax. Now, the mistake is buying a generic policy without first asking. You don't necessarily need every single one of these, but you need to find out what you need. So, what financial problem am I trying to protect against? That's the question to ask. Does the family need income If someone dies? Does the company need cash if you cannot work? Would your business partner need funds to buy your shares in the unfortunate event that you pass? Does the company have a loan that depends on you? Of course, you have to protect your family first, but also understand whether the company itself is financially dependent on your health and ability to work. Since you've stayed this long, there are 3 smaller benefits directors often miss. So if you've stayed this far, I 3 bonus areas for you that you can also use to improve your tax efficiency. This may not transform your finances individually, but they are worth handling correctly. A company mobile phone. So a company-provided mobile phone can receive specific tax treatment, but the company paying you back for your own personal phone contract is not automatically treated in the same way. Who owns the contract matters. You may want to put the contract under the company, okay? How the phone is provided matters. Is it the company buying the phone? And the number of phones provided may also matter. These things vary. Working from home. If you genuinely work from home, the company may be able to reimburse a certain additional household cost. Of course, within HMRC's rules. Now, again, larger claims require more evidence and a defensible calculation. This is not permission to put your entire mortgage, electricity bill, and council tax through the company. Only appropriate business-related costs should be considered. For instance, use of home office is one of them. Number 3, annual staff event or Christmas party, whatever. It's a qualifying annual staff event like a Christmas party. You know, you could get like expenses that are exempted. So qualifying events, as long as it does not exceed £150 per person. That £150 is an exemption, not a cash allowance. If the qualifying cost goes over the limit, the tax treatment can change. As long as the event is open to all staff to attend. So if you have 5 staff, Could be £750. If it's just you, £150. So you may register a limited company or you already have one. That does not mean that you already know how to use it well. I hope this was helpful. The doctor I met, the GP, she had already registered a limited company. What she lacked was a clear operating plan on how to extract the income in an efficient way. So how should income enter the company? How should money leave it? What belongs to the company? What remains personal to you? How can you take out money out of the company in a tax-efficient way? How should the company support her pension protection and long-term goals? These questions matter far more than simply having limited after your name. Look, I've created a free limited company expense checklist for doctors. If you don't know the expenses to claim, I've created— it's got like 10 common expenses that doctors leave out in a limited company. So I've created that. The checklist is not personal tax advice, but it will help you identify possible gaps and prepare better questions for your accountant, advisor, or protection specialist. It will help you also not to leave money on the table. You can download it using the link below in the description or just comment free and I'll send it to you free of charge. And tell me in the comments, which of these 7 areas are you just learning about today? Did you learn something new today that could help you save some money or make some money? And if you have not watched my previous video on whether your work is genuinely self-employed, watch that next. If you have already seen it, watch the video now appearing on your screen. I think YouTube has selected it based on what it thinks will help you next and most.

Okay.

The algorithm is clever. Because optimizing the wrong structure is still the wrong answer. You want to be able to make sure you're optimizing the right stuff. Of course, at this point, I expect you hit subscribe. I don't take it for granted, but go ahead, hit subscribe and share it with a colleague who might benefit from practical financial education, specifically for doctors. Let's not be selfish with it, and I'll see you in the next video. All right then.