Calculator · UK 2025/26
Principal Extraction: Partnership vs Limited Company
Compare partnership / sole-trader vs limited company on principal profit. Pension contribution and NHS Pension impact factored in.
Your inputs
On tax alone, partnership is worth £4,520 more
Partnership preserves NHS Pension accrual on full profit. Ltd-co accrues only on the £12,570 salary.
Partnership / Sole Trader
Wins on tax£91,233
net of all tax + admin
Total tax + admin: £58,768
Limited Company
£86,712
net of all tax + admin
Total tax + admin: £63,288
Notes: Indicative UK 2025/26 model. Partnership = sole trader for tax purposes when there's one principal. Ltd-co model assumes £12,570 director salary + balance as dividend, £2,500 admin cost, no Employment Allowance. Pension contribution treated as deductible from taxable income on both sides.
Critical: this model does NOT cost the NHS Pension accrual loss for incorporated principals. For an NHS-active principal with 10-15 years of service ahead, the lost pension accrual on the dividend portion can outweigh the headline tax saving from incorporation. The numbers below show the tax position; the actuarial pension position needs separate modelling.
Frequently asked
- Why does the calculator show partnership often winning despite the headline 'Ltd saves tax' narrative?
- Because the gap at 2025/26 rates is much smaller than is often claimed. Corporation tax + dividend tax stacked together approaches personal income tax + NI on equivalent profit. The real reasons to incorporate (retained earnings for practice investment, multiple shareholders, future sale planning) usually outweigh the headline tax saving, which is itself modest.
- How big is the NHS Pension impact?
- Materially negative for incorporated principals. NHS Pension contributions accrue only on PAYE salary, not dividend income. A principal switching from sole-trader (£150,000 all-pensionable) to Ltd-co (£30,000 salary + £100,000 dividend) loses £100,000/year of pensionable earnings. Over 10-15 years, this is tens of thousands of pounds less in eventual pension. The calculator flags this but does not quantify it because it requires actuarial modelling.
- What's the optimal salary level in a Ltd-co dental practice?
- Most efficient is typically the personal allowance (£12,570 in 2025/26), avoiding NI on the salary portion. For an NHS-active principal who wants higher pensionable earnings, a higher salary up to around £30,000-£40,000 can be tax-efficient when the NHS Pension accrual on it is factored in. Above that, additional salary is less efficient than dividend.
The full structure question
Tax is one variable. Sale plans, future partner additions, family employment, and NHS Pension goals all interact with the structure decision.