Introduction
Operating as a limited company can be a useful tool for medical professionals, but it does come with considerations when it’s time to move on from your business.
How you close your company and withdraw any cash can have an impact on your wider exit strategy, so they should be considered together. What your exit strategy looks like will be individual to you, depending on the nature of your career and your goals for the future.
This could look like a gradual transition out of practicing, either through reduced hours or by cutting back on certain aspects of your role. Or you might just want a clean break, handing your responsibilities over to a successor or closing your company altogether.
Regardless of your route to exiting, there are some common aspects to planning that apply for most medics, particularly those with limited companies. In this guide, we’ll discuss the most popular strategies for making the most of your limited company cash, with key considerations for your own exit strategy.
Withdrawing money from your limited company
You might be running a limited company alongside your day-to-day work. If you’ve been accruing money in the company over time, you may now be wondering what to do with it. As your limited company is classed as its own legal entity, you can’t just withdraw the money as you like.
To make the most out of any cash and assets in your company, you’ll want to consider all your options. For example:
- Business Asset Disposal Relief (BADR)
- Dividends
- A company funded pension
If you’re thinking about dissolving your company, you should ideally withdraw any funds from your business account first, as any leftover money will be deemed ownerless and will be lost forever.
It’s always worth seeking advice from your accountant or tax adviser, as they’ll be able to suggest the right strategies for your medical business.
Can I use Business Asset Disposal Relief?
An often tax-efficient way to withdraw your funds is through Business Asset Disposal Relief (BADR), formerly Entrepreneur Relief. This means you may pay less Capital Gains Tax (CGT) when you sell or ‘dispose of’ your medical business.
As a higher-rate taxpayer, the standard CGT rate sits at 24%. For assets eligible for BADR, you’ll instead pay 14%. It’s worth noting that there is a proposed rise to 18% from 6th April 2026.
To be eligible:
- You must have owned your business for at least two years and be registered as either a sole trader or business partner
You won’t be considered eligible if:
- HM Revenue & Customs (HMRC) views your company as a ‘non-trading’ business. This is likely if you hold a lot of cash within your business
If you own the physical premises you operate from, you may be more likely to get BADR.
Remember that tax treatment depends on individual circumstances and may be subject to change in the future.
Can I take dividends from my limited company?
Another option is to keep your medical business running but without generating any further income. If you stay on as a shareholder, you can take the money you’ve accrued by paying yourself dividends.
You can only take dividends from profits after corporation tax has been deducted, so you’ll need to check your company accounts first. You’ll then need to hold a meeting with any directors to confirm agreement that you can take the dividends. This part will be less formal if you’re the sole director.
You don’t pay national insurance on dividends. And when it comes to tax, you won’t pay any on dividend income that falls within your Personal Allowance. You’ll also get a Dividend Allowance (the amount changes each year).
Any dividends outside of this allowance will be taxed one of three ways, depending on your tax band:
- Basic rate: 8.75%
- Higher rate: 33.75%
- Additional rate: 39.35%
Choosing this option means you’ll have to adhere to the same processes you do now, including filing annual reports and accounts.
Can I start a company funded pension?
If you currently have an income from the NHS or other source that you can happily live on, then you may want to defer any income from your limited company to a later date.
One way to do this is by contributing to a pension through your company. Employer pension payments normally qualify as an allowable business expense that you can deduct from your company’s taxable profits to reduce your corporation tax liability. Depending on the rate of corporation tax you pay, this could be a saving of 20% or more.
If you direct funds into a pension rather than taking it as a salary you won’t be personally liable for income tax or employee national insurance on those contributions, so you’ll likely make a tax saving. As a company, you also won’t need to pay employer national insurance contributions on that money.
On the flipside, company funded pensions don’t do anything to help mitigate the 60% personal tax trap, the loss of tax-free childcare or the loss of Child Benefit.
If you aren’t aware, the 60% personal tax trap refers to the amount of tax you could end up paying if your total income is between £100,000 and £125,140. This is due to the tapering of the personal allowance.
If you fall into this bracket, this may not be the best option for you. You should also bear in mind that you can’t access any money in your pension until age 55 or later.
If you’re interested in a company-funded pension, a Specialist Financial Adviser from Wesleyan Financial Services can help you get started. Advice charges may apply.
Comparing the ways to withdraw money from your limited company
| Salary | Dividends | Company funded pension | |
|---|---|---|---|
| Allows immediate access? | Yes | Yes | No (only available at pension access age, usually 55+) |
| Corporation tax deduction? | Yes (salary is deductible from company profits) | No (dividends are not deductible) | Yes (fully deductible from company profits) |
| Corporation tax payable? | No (on the amount used for salary) | Yes (paid before dividends are issued) | No (as amount reduces taxable profit) |
| Income tax? | Paid via PAYE: 20%/40%/45% above allowance | 8.75%, 33.75%, or 39.35% (rates on dividends) | Paid on withdrawal (with 25% tax free lump sum; rest taxed as income) |
| Employee NI? | Yes (above NI threshold: 8%/2%) | No | No |
| Employer NI? | Yes (13.8% above threshold) | No | No |
However you choose to withdraw cash from your limited company, how you manage that money going forward should be considered as part of your wider financial plans.
If you’re moving on to a different venture, you might want to put that money towards funding your next business. If you’re planning on retiring, you’ll want to make sure your money lasts as long as you need it.
Our Specialist Financial Advisers can help you with both your personal and business financial planning needs. Advice charges may apply.
Should I invest my company cash?
If you’re nowhere near exiting your business and you’re just exploring your future options, you might be in a good position to make your company cash work harder.
Instead of leaving your money in your limited company while you work, you may want to consider investing some of it. By investing, you could end up with more in retirement than if you left it in your business accruing zero interest. Even if you put it in a business savings account, the interest rates are typically low.
Investing your money gives you the opportunity to grow your money, despite a potentially higher tax bill when you retire or surrender the investment. This is because you only pay tax on the growth.
At Wesleyan, commercial investments are held in the WUTM Commercial Investment Account, allowing you to invest your business cash in a range of risk-rated funds.
Bear in mind the value of investments and any income can go down as well as up and you may get back less than you invest.
Selling your premises
If you own a building, rather than leasing, what you do with your premises will be an important part of your exit strategy. Not many doctors have a business premises of their own, but if you do, you have more options than just selling.
For example, you may choose to keep the building and lease it to another medical business as a landlord. Speaking to a commercial property solicitor would be a good starting point to understand your responsibilities, and you might want to consider taking out landlord insurance.
If you do choose to sell your medical business, you may want to speak to a Specialist Financial Adviser. They can identify tax-efficient strategies for selling your business or share of the practice, helping you to maximise the financial outcomes of the sale.
Tax treatment depends on the individual circumstances of each client and may be subject to change in the future.
Closing your company
When it’s finally time to say goodbye, you have a couple of options for closing down your limited company.
Striking off your company
The easiest way to close your limited company is to simply strike it off through Companies House.
To do this you’ll need to:
- Make sure that all your company assets are dealt with, including withdrawing any cash from your business and closing any business bank accounts
- Fill out a DS01 form and get it signed by the majority of your directors (this might just be yourself) and pay the fee (£33 or £44)
- Send your final company accounts to HMRC and pay any remaining Corporation Tax
To be eligible:
- You need to stop trading three months before you apply
- Make sure you’ve paid off any company debts
Closing your company via liquidation
If your company has assets and profits worth over £25,000, a more tax-efficient route may be to close your company via liquidation.
This more formal process means that any funds shared between shareholders are subject to Capital Gains Tax rather than income tax. This could lead to a lower tax bill, especially if you’re also eligible for Business Asset Disposal Relief.
To liquidate your company, you’ll need to:
- Contact a licensed insolvency practitioner
- Get the majority of shareholders to agree to the liquidation
- Sign a Declaration of Solvency that confirms you can repay any company debts
- Pay the liquidator’s fee (this can range from £1,000 to £7,500)
Whichever option you choose will largely depend on the value of the assets held within your limited company. You should always seek advice if you aren’t sure about the best route for your business.