Locum Tax

Employment Status: Self-Employed vs Employed

The first and most important question for any locum doctor is whether HMRC considers you self-employed or employed. This determines how you pay tax, which expenses you can claim and whether you need to file a Self Assessment return. Most GP locums working through direct bookings with practices, controlling their own schedule and providing their own equipment, will be classified as self-employed. However, locums working through agencies or on longer-term placements where the practice controls how and when work is done may be deemed employed — or caught by the off-payroll working rules (IR35).

Getting this wrong has serious consequences. If HMRC reclassifies a self-employed locum as employed, the practice (or agency) becomes liable for PAYE and employer NICs on all payments made, plus penalties and interest. The locum may also lose the right to claim business expenses. HMRC's Check Employment Status for Tax (CEST) tool provides an initial indication, but its results are not always reliable for medical locums. Where there is any doubt, take professional advice before starting an engagement — not after HMRC opens an enquiry.

Self-Assessment Requirements for Locums

Self-employed locum doctors must register with HMRC for Self Assessment and Class 2 National Insurance within three months of starting locum work. You'll then file an annual tax return reporting all self-employed income and expenses. The deadline is 31 January following the end of the tax year — for example, income earned between 6 April 2025 and 5 April 2026 must be reported by 31 January 2027.

If you also have PAYE income from a salaried NHS role, this must be included on the same return. Many locums underestimate their tax liability because they forget that locum earnings are added on top of salaried income, potentially pushing them into a higher tax band. Payments on account apply — HMRC requires two advance payments (31 January and 31 July), each equal to half the previous year's Self Assessment liability. New locums should set aside 30–40% of net locum income from day one to avoid a cash-flow shock when the first tax bill arrives.

Allowable Expenses for Locum Doctors

Self-employed locums can deduct legitimate business expenses from their taxable income, reducing both income tax and Class 4 NICs. The key test is that the expense must be incurred "wholly and exclusively" for the purpose of the locum business. Common allowable expenses include:

• Travel costs to temporary workplaces — mileage (45p per mile for the first 10,000 miles, 25p thereafter), parking, train fares and accommodation for distant placements
• Professional indemnity (MDU, MPS or other provider) — fully deductible
• Professional subscriptions — GMC registration, BMA, RCGP, Royal College fees
• Medical equipment — stethoscopes, ophthalmoscopes, bags and clinical tools
• Training and CPD courses directly related to your medical practice
• Accountancy fees for preparing your tax return and business accounts
• Phone, internet and home office costs (proportionate business use)
• Locum agency fees and platform subscription costs

Keep receipts and records for every expense. HMRC can enquire into any return within 12 months of the filing deadline (or longer if they suspect carelessness or fraud), and you will need documentary evidence to support every claim.

Record Keeping Best Practices

Good record keeping is not optional — HMRC requires self-employed individuals to maintain records for at least five years after the 31 January filing deadline for the relevant tax year. For locum doctors, this means keeping systematic records of every session worked, every invoice raised and every expense incurred. Falling behind creates a stressful year-end scramble and increases the risk of under- or over-claiming expenses.

• Use cloud accounting software (Xero, FreeAgent or QuickBooks) to log income and expenses in real time
• Photograph receipts immediately — paper fades, and lost receipts cannot support expense claims
• Maintain a mileage log recording date, destination, purpose and miles for every business journey
• Reconcile bank statements monthly to catch missing invoices or uncategorised payments
• Keep a separate business bank account to simplify record keeping and demonstrate clear business boundaries to HMRC

Tax Planning Strategies for Locum Doctors

Beyond claiming expenses, locum doctors have several strategies available to manage their tax position. Pension contributions are one of the most effective — if you are not already contributing to the NHS Pension Scheme through a salaried role, making personal pension contributions provides income tax relief at your marginal rate. Even locums who are in the NHS Scheme can make additional voluntary contributions or pay into a SIPP to shelter more income.

Timing is also important. If you expect your income to drop next year (for example, taking a career break, returning to training or reducing sessions), consider deferring invoicing or accelerating expenses into the current year where commercially reasonable. For locums earning above £100,000, the personal allowance taper means effective marginal tax rates can reach 60% — even small reductions in adjusted net income through pension contributions or Gift Aid donations can restore thousands of pounds of personal allowance. If your annual locum turnover exceeds the VAT registration threshold (currently £90,000), you must register for VAT — though most medical services are VAT-exempt, some locum agency structures may require standard-rated treatment.