At Kudos Accounting, we work closely with doctors, dentists, pharmacists, healthcare recruitment agencies, social care providers, and other healthcare professionals across the UK. With the 2025/26 tax year now underway, it’s a good time to review what’s changed, and what you can do to make sure your finances are in the best possible shape.
Here are the key updates and what they could mean for you or your business.
- Dividend Allowance Reduced to £500
If you operate through a limited company and pay yourself using dividends, the tax-free dividend allowance is now just £500 for the 2025/26 tax year. That’s down from £1,000 last year and £2,000 the year before.
For practice owners, care providers, recruitment agencies and pharmacy businesses, this change means more of your dividend income will now be taxed: at 8.75%, 33.75% or 39.35%, depending on your income level.
What to do:
- Review how you split your income between salary and dividends.
- Consider making additional pension contributions to reduce your tax liability.
- If your spouse is involved in the business, income splitting (if appropriate and legal) might help reduce your household’s tax bill.
- Full Expensing Still Available for Equipment Purchases
The Full Expensing scheme allows limited companies to claim 100% tax relief on qualifying new equipment in the year it’s bought. This can be valuable for businesses investing in:
- Medical or dental equipment
- IT systems and practice software
- Office furniture and fittings
This relief doesn’t apply to second-hand equipment or to sole traders and partnerships. If you’re considering a purchase this year, timing it before your business year-end could improve your tax position.
- Make Sure You’re Claiming All Allowable Expenses
Many healthcare professionals overlook tax-deductible expenses. Common examples include:
- Subscriptions to professional bodies (GMC, GDC, GPhC, BMA, CQC)
- Medical indemnity and other business insurance
- CPD and work-related training
- Travel between client sites or work locations (not commuting)
- Office costs, including work-from-home expenses
- Uniforms, equipment, and software used for work
- Lifetime Allowance Abolished: Pension Planning Changes
From April 2024, the government abolished the Lifetime Allowance (LTA) on pensions, removing the cap on how much you can build up in your pension without facing extra tax charges.
However, there are still new limits to note:
- Lump Sum Allowance: the tax-free amount you can take as a lump sum remains capped at £268,275.
- Lump Sum and Death Benefit Allowance: capped at £1,073,100.
This is especially important for higher earners, such as GPs, consultants and directors, who may now be able to invest more in pensions than before, but still need to plan carefully to avoid triggering other limits (such as the Annual Allowance or Tapered Annual Allowance).
- Making Tax Digital (MTD) Starts from April 2026
Making Tax Digital for Income Tax will apply from 6 April 2026 for individuals with self-employment or property income over £50,000 per year. This includes many healthcare professionals with private work or rental income.
Instead of submitting one annual tax return, you’ll need to:
- Keep digital records
- Submit updates to HMRC every quarter
- Use MTD-compliant software (e.g. Xero, QuickBooks, FreeAgent)
This won’t apply to limited companies just yet, but directors with rental income or locum work may still fall within its scope.
What to do now:
- If you’re still using spreadsheets or paper records, consider switching to digital software this year.
- Check whether MTD applies to you based on your income sources.
- Speak to your accountant about preparing early: MTD compliance will be mandatory.
- New Penalties for Late Tax Payments
From 2025/26, late payment penalties have been restructured:
- If you’re 15 days late, you’ll face a 2% penalty on the tax owed.
- After 30 days, the penalty rises to 4%.
This applies to Self Assessment, VAT, and other taxes. These changes mean there’s less leniency than before, so it’s important to keep on top of deadlines.
Final thought
Keeping up with tax changes isn’t easy when you’re managing a clinic, running a care service, or balancing NHS work with private income. But reviewing your finances once a year, or even once a quarter, can help you avoid unnecessary tax and keep your business in good financial shape.
Kudos Accounting provides practical, specialist advice to healthcare professionals and organisations across the UK. Whether you’re a sole practitioner, a company director, or managing multiple locations, we’re here to help you stay compliant and plan ahead with confidence.
Need advice? Call us on +44 20 3870 5385 to speak to an accountant who understands the healthcare sector.