Accountants for Locum Doctors: 2026 Guide
Ask three locum doctors how they’re taxed and you’ll likely get three different answers — and all three could be correct. Whether you’re paid PAYE through an agency, invoicing GP practices directly as a sole trader, or running your own limited company changes almost everything about your tax position, your expenses, and even your NHS pension. This guide from Filing Accounts UK explains what actually applies to you, using only verified facts from HMRC and NHS pension guidance.
At Filing Accounts, we work with locum doctors across all three engagement models, because the right accounting advice genuinely depends on which one applies to you.
The Three Ways Locum Doctors Get Paid — And Why It Matters
1. PAYE via an Agency
Tax and National Insurance are deducted at source, same as any employee. You’re inside IR35 by default here, and there’s genuinely very little to manage yourself — though if you have no other untaxed income and nothing to claim, you may not even need to file Self Assessment at all.
2. Sole Trader, Invoicing Directly
Common among GP locums invoicing practices directly rather than through an agency. This route sits entirely outside IR35 — the rules simply don’t apply to sole traders — and you claim expenses and pay tax through Self Assessment in the normal way, with Class 2 and Class 4 National Insurance instead of the Class 1 an employee pays.
3. Your Own Limited Company (Personal Service Company)
Here, IR35 genuinely matters, and you don’t decide your own status — the hirer does. For an NHS Trust or a medium/large private hospital, that means they issue a Status Determination Statement confirming whether the engagement sits inside or outside IR35. Different shifts, different trusts, and different contracts can land differently — it’s entirely possible to be outside IR35 on one contract and inside on another running at the same time.
What Changes Inside vs Outside IR35
This is where the real financial impact lands for limited company locums. If a contract is ruled inside IR35, tax and NI are deducted before the money even reaches your company, largely PAYE-style, and your ability to claim the usual business expenses on that income shrinks significantly. Outside IR35, you continue invoicing through your company, draw a mix of salary and dividends, and can claim legitimate business expenses in the normal way — the difference in take-home pay between the two outcomes on the same gross fee can be substantial.
What You Can Actually Claim
For sole traders and outside-IR35 limited company locums, the following are generally allowable, applying the standard “wholly and exclusively” rule:
- GMC registration fee and other professional registration costs
- Medical indemnity insurance — MDU, MPS, or similar cover
- BMA and Royal College subscriptions
- CPD courses that maintain or update your existing skills (not training for a genuinely new specialism)
- Travel between temporary workplaces at approved mileage rates — 45p per mile for the first 10,000 business miles, 25p after
- Medical equipment genuinely required for your work
- Home office, on a fair apportionment basis, if you handle admin from home
One point worth being clear on: travelling between different temporary sites is claimable, but your journey to a single, regular workplace is ordinary commuting and isn’t — the same distinction applies whether you’re a doctor, a dentist, or any other self-employed professional.
Sole Trader or Limited Company: Where the Numbers Tend to Cross Over
There’s no single correct answer, but as a general pattern, a limited company often starts becoming more tax-efficient somewhere around £50,000–£60,000 of annual locum earnings, largely down to Corporation Tax rates and the way dividends are taxed compared to Income Tax on the full amount as a sole trader. It comes with real trade-offs, though — more administration, IR35 exposure to manage, and a decision about whether you’re comfortable with the added complexity for the saving involved. This is genuinely worth running as an actual calculation on your numbers, not a rule of thumb.
Don’t Forget the NHS Pension
NHS pension contributions, often averaging around 12.5% of income, are deducted before tax is calculated — which means they also reduce your adjusted net income. If you’re anywhere near £100,000, this matters directly: pension contributions can help pull you back under the threshold where the personal allowance starts tapering away, avoiding the effective 60% marginal rate in that band. Locums operating through a limited company generally give up direct NHS pension access on that income, which is worth weighing carefully against any tax saving from incorporating.
Making Tax Digital: Now Live for Many Locums
Since 6 April 2026, sole-trader locums with qualifying income above £50,000 must follow Making Tax Digital for Income Tax — digital records and quarterly updates instead of a single annual return. Most full-time sole-trader locums fall into this now. This doesn’t apply to limited company locums, since MTD for Income Tax is specifically an Income Tax regime, not a Corporation Tax one.
Locum Doctor Tax at a Glance
| Engagement Type | IR35 Applies? | Who Decides Status? | NIC Class |
|---|---|---|---|
| PAYE via agency | Effectively inside by default | N/A | Class 1 |
| Sole trader, direct invoicing | No — outside IR35 entirely | N/A | Class 2 & 4 |
| Limited company (PSC) | Yes | The hirer (Trust/hospital) | Class 1 (director salary) |
Common Mistakes to Avoid
Assuming Your Status Is the Same Across Every Contract
IR35 status is assessed per engagement — one shift can be inside while another, at a different trust, is outside.
Claiming Home-to-Regular-Site Travel as an Expense
Only travel between different temporary workplaces qualifies — a single, regular site is ordinary commuting.
Ignoring How Pension Contributions Affect the £100k Trap
Pension contributions can genuinely help manage the personal allowance taper — worth factoring into your planning, not an afterthought.
Incorporating Without Weighing Up the NHS Pension Trade-Off
A limited company can be more tax-efficient on paper, but giving up NHS pension access on that income is a real cost worth including in the comparison.
Frequently Asked Questions
Do sole-trader locum doctors need to worry about IR35?
No. IR35 only applies to those working through a limited company or personal service company — sole traders sit outside it entirely.
Who decides my IR35 status if I use a limited company?
The hirer — the NHS Trust or medium/large private hospital — issues a Status Determination Statement.
At what income does a limited company become worthwhile?
Often somewhere around £50,000–£60,000 a year, though this depends on your specific numbers and whether you value the NHS pension access you’d give up.
Does Making Tax Digital apply to me?
If you’re a sole-trader locum with qualifying income over £50,000, yes, since 6 April 2026. It doesn’t apply to limited company locums.
Need an Accountant Who Understands Locum Work? Talk to Filing Accounts UK
Whether you’re PAYE, sole trader, or running your own company, the right advice depends entirely on which one applies to you. At Filing Accounts, we help locum doctors choose the right structure, claim the expenses they’re entitled to, and stay on top of IR35 and Making Tax Digital.
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