Working as a locum doctor in the UK gives you flexibility that permanent NHS staff never have, but it also makes you responsible for your own tax, National Insurance and pension. This locum doctor tax complete guide is the overview: how you are taxed for 2026/27, whether to work as a sole trader or through a limited company, what you can claim, and how to keep building your NHS pension. Where a topic deserves its own deep dive (IR35, expenses, self-assessment filing, limited companies, NHS pension forms) we link you to the detailed guide rather than repeat it here.

Whether you are a newly qualified doctor taking on your first locum sessions or an experienced GP or hospital locum reviewing your set-up, getting the structure right protects both your compliance and your take-home pay. This is general information, not personal advice.

How locum doctors are taxed in the UK

Your tax treatment follows the substance of how you actually work, not the label on your invoice. Locum doctors usually fall into one of three set-ups, each taxed differently.

Agency or NHS staff bank (PAYE employee)

When you work through an NHS staff bank or a recruitment agency as an employee, tax is the simplest. The bank or agency operates PAYE, deducting income tax and Class 1 National Insurance from your gross pay, and you receive a P60 at year end. You can claim only limited employment expenses, and you do not get the planning flexibility of self-employment. Many locums also encounter umbrella companies in agency chains; if that applies to you, read our guide to locum doctor umbrella companies and the 2026 reforms.

Sole trader (self-employment)

The most common route for a genuinely freelance locum is to work as a sole trader, invoicing the practice or trust directly. You report your profit on the self-employment pages (SA103) of your self-assessment return and pay income tax plus Class 4 National Insurance on those profits. There is no intermediary company, so the IR35 / off-payroll rules do not apply to a sole trader: your status is judged on the employed-versus-self-employed factors (control, personal service, mutuality, financial risk, integration) instead. The trade-off is unlimited personal liability and doing your own bookkeeping, but for most locums the simplicity wins.

Personal service company (PSC)

Some established locums work through their own limited company, also called a personal service company. A company is a separate legal person that pays corporation tax on its profits, and you extract money as a mix of salary and dividends. This route only makes sense for private or locum work that is genuinely outside IR35, and it carries a significant catch for doctors: company income is not NHS-pensionable (covered below). Because a PSC sits inside the off-payroll framework, the next section matters a great deal.

IR35 and off-payroll: who decides your status

If you work through a PSC, the off-payroll rules decide whether your engagement is treated like employment for tax. The crucial point for doctors is that for most NHS work, you do not decide your own status:

  • NHS trusts and other public-sector hirers determine your status and, where you are inside IR35, the trust or the agency in the chain operates PAYE and National Insurance on that income (the rules for public-sector engagers have applied since 6 April 2017).
  • Medium and large private hirers (for example larger private hospitals and clinics) determine status, issue a Status Determination Statement with reasons, and the fee-payer deducts tax (since 6 April 2021).
  • Small private clients (within the Companies Act small-company thresholds) are the exception: there your PSC still decides its own IR35 status.

Inside IR35, the income is taxed close to employment and the salary-plus-dividend planning is not available on it. Outside IR35, your company is paid gross and you extract normally. A locum working across several hirers can hold a mix of inside and outside determinations. To be clear on a common myth: IR35 has not been abolished and the off-payroll rules have not been repealed; the April 2024 change was only a set-off mechanic that lets HMRC offset tax already paid against a deemed employer liability. For the full picture, read locum doctor IR35: what you need to know.

Sole trader vs limited company: the real comparison

The sole-trader-versus-company question is the one most locums ask, and the honest 2026/27 answer is that the tax saving from incorporating is narrower than it used to be, and for doctors it comes with a pension cost.

A limited company pays corporation tax at 19% on profits up to £50,000, 25% on profits over £250,000, with marginal relief tapering between (an effective rate of about 26.5% in the £50,000 to £250,000 band, FY2025 and FY2026). You then extract profit as salary and dividends. Dividend tax rose from 6 April 2026: the ordinary rate is now 10.75%, the upper rate 35.75% and the additional rate 39.35% (unchanged), with a £500 dividend allowance (2026/27). For comparison, the 2025/26 dividend rates were 8.75% / 33.75% / 39.35%. That increase narrows the headline gap between dividends and self-employed profits taxed at income tax plus 6% / 2% Class 4 National Insurance.

The decisive factor for doctors is the NHS pension. A limited company cannot hold an NHS contract, and income routed through a company and paid out as dividends is not NHS-pensionable. So any corporation-tax saving on locum income taken through a PSC has to be set against the loss of NHS pension accrual on that income, which for many doctors is the more valuable benefit. Never look at the tax saving alone. Our limited company pros and cons guide works through both sides of that trade-off in full.

Self-assessment and National Insurance for 2026/27

As a sole trader locum you report your income through self-assessment. If your gross self-employed income exceeds the £1,000 trading allowance you must register, by 5 October following the end of your first tax year of locum work, then file your return and pay by 31 January. Where your tax bill is large enough you also make payments on account on 31 January and 31 July, each 50% of the previous year's liability.

On the National Insurance side for 2026/27:

  • Class 4 National Insurance is charged at 6% on profits between £12,570 and £50,270, then 2% on profits above £50,270. (The old 9% main Class 4 rate fell to 6% from 6 April 2024.)
  • Class 2 National Insurance is no longer a separate required payment from 6 April 2024. If your profits are at or above the small profits threshold you are treated as having paid it and keep your state pension entitlement, so there is no weekly Class 2 charge. Doctors with very low profits can still pay voluntary Class 2 to protect their record.

For the full filing walk-through, including first-year overlap and the trading allowance, see our locum doctor self-assessment filing guide.

Making Tax Digital: what changes for locums

Making Tax Digital for Income Tax (MTD for ITSA) brings in digital records and quarterly updates for sole traders, phased by qualifying income: £50,000 from 6 April 2026, then £30,000 from 6 April 2027 and £20,000 from 6 April 2028. Qualifying income is your gross trading (and property) income, tested on the relevant prior year's return. Most full-time sole-trader locums exceed £50,000 and are therefore in scope from 6 April 2026, so it is worth moving to cloud bookkeeping now. Note that limited companies are out of MTD for ITSA (it is an income-tax regime), so a locum trading through a PSC is not brought in by it. The old £10,000 threshold no longer applies.

Allowable expenses for locum doctors

You pay tax on profit, not turnover, so claiming every expense incurred wholly and exclusively for your locum work directly reduces your bill. Common allowable costs include:

  • Medical indemnity (MDU, MPS or MDDUS). Note that NHS GP clinical negligence in England is covered at no subscription by the Clinical Negligence Scheme for General Practice (CNSGP) from 1 April 2019, so your own paid indemnity is mainly for private, non-clinical and regulatory cover.
  • Your GMC annual retention fee, plus relevant Royal College, specialty and BMA subscriptions on HMRC's approved List 3.
  • CPD genuinely relevant to your current practice, and equipment (usually relieved through capital allowances).
  • Business mileage in your own car at 55p per mile for the first 10,000 business miles in 2026/27, then 25p per mile (the rate rose from 45p on 6 April 2026). Travel between sites on the same day is allowable; home to your first site of the day is ordinary commuting and is not.
  • A reasonable proportion of home-office, phone and internet costs, plus accountancy fees and business bank charges.

Keep contemporaneous records: invoices, bank statements, receipts, a mileage log and your subscription confirmations. Our locum doctor expenses guide sets out the full claimable list with the rules behind each one.

Keeping your NHS pension as a locum

One of the biggest mistakes freelance locums make is dropping out of the NHS Pension Scheme by accident. The scheme is a valuable defined-benefit arrangement: all active members now accrue in the 2015 CARE section (1/54th of pensionable earnings each year). The annual allowance, the cap on tax-favoured pension growth, is £60,000 for 2026/27, tapering for the highest earners where threshold income exceeds £200,000 and adjusted income exceeds £260,000, down to a minimum of £10,000.

As a freelance GP locum you pension your eligible NHS locum income by completing GP Locum forms A and B and paying contributions through the PCSE / Solo route, making sure you are on the correct tiered contribution. You do not file an end-of-year certificate as a locum, but you must pay the right tier. The incorporation trap bears repeating: route that income through a company and take it as dividends, and it earns no NHS pension accrual at all. For the practical mechanics, read our guide to NHS pension for locums: forms A and B.

Do most locums need to worry about VAT?

Generally no. The supply of medical care by a registered doctor is exempt from VAT where the principal purpose is the protection, maintenance or restoration of the patient's health, so most clinical locum work does not count towards VAT registration. You only register if your taxable (non-exempt) turnover passes £90,000 (the threshold since 1 April 2024, up from £85,000). The work that can be standard-rated, and therefore counts towards that threshold, is purely cosmetic or aesthetic treatment with no therapeutic purpose, and medico-legal or expert-witness reports prepared so a third party can make a decision. If you take on that kind of private work alongside clinical locum sessions, it is worth checking your position.

Getting professional help

The mix of self-assessment, IR35, NHS pension forms and the sole-trader-versus-company decision is exactly where a specialist medical accountant earns their keep. A good one will:

  • Structure your locum work tax-efficiently while protecting your NHS pension accrual
  • Help you read your IR35 determinations across multiple hirers
  • Make sure you claim every allowable expense and the right mileage
  • Get you ready for Making Tax Digital and handle any HMRC enquiry

This locum doctor tax complete guide covers the essentials, but every locum's situation is different, and the right structure depends on your IR35 position, your income and how you value the NHS pension. For guidance tailored to your circumstances, speak to our specialist medical accountants who work exclusively with UK healthcare professionals.