Locum Doctor Tax Guide: Take-Home Pay, Expenses, and NIC for 2025/26

Who this guide covers

This guide is for doctors who undertake locum work outside a PAYE contract. That includes GPs working through their own limited company or as sole traders, hospital locums paid via an agency or direct engagement, and doctors combining a PAYE substantive post with self-employed sessional work.

If your entire income is PAYE, your employer handles tax and NIC and this guide is less relevant. If any of your income is outside PAYE, the figures and rules below apply to that portion.

Income tax for 2025/26

For the 2025/26 tax year, income tax bands are:

• Personal allowance: £12,570 (no tax)
• Basic rate (20%): £12,571 to £50,270
• Higher rate (40%): £50,271 to £125,140
• Additional rate (45%): above £125,140

For locum doctors, it is net income after deducting allowable expenses and pension contributions that is taxed, not gross fees. This distinction is significant: a locum earning £80,000 gross with £5,000 of expenses and a £10,000 pension contribution has a taxable income of £65,000, keeping a greater portion in the basic rate band.

Class 4 National Insurance Contributions

Self-employed doctors pay Class 4 NIC on their net self-employed profit (after expenses, before pension contributions), not on total income from all sources. For 2025/26:

• 6% on profits between £12,570 and £50,270
• 2% on profits above £50,270

Note: the main Class 4 rate was 9% until it was reduced to 8% from 6 April 2024, and then further to 6% from 6 April 2024 under the National Insurance Contributions (Reduction in Rates) Act 2023. Class 2 NIC was abolished from 6 April 2024. If any tool or guide you are using still shows 9%, the figures are wrong.

For locums with a PAYE substantive post, the PAYE income does not attract Class 4 NIC. Class 4 applies only to the self-employed profit.

Allowable expenses

Allowable expenses for locum doctors include costs that are incurred wholly and exclusively for the purpose of the self-employed work. Common allowable expenses are:

• Professional subscriptions: GMC registration, MDU/MPS/MDDUS defence union, BMA, Royal College fees
• Continuing professional development: courses, conferences, relevant books and journals
• Business travel: mileage from your base to each locum site (not commuting from home)
• Locum agency fees and booking costs
• A proportion of telephone costs attributable to work
• Equipment purchased solely for work
• Accountancy fees for preparing your self-assessment

Mixed-use expenses (for example, a phone used for both personal and work purposes) should be apportioned. Only the work proportion is deductible. HMRC guidance and case law on the "wholly and exclusively" test is strict: expenses with a private element are either disallowed entirely or apportioned.

Home office costs can be claimed where you genuinely use part of your home as an office for administrative work. The simplest approach is the HMRC flat rate (£6/week for up to 25 hours/month, scaling up). A full apportionment based on floor area and time can produce a larger deduction but creates a proportional capital gains tax risk on the home-office portion of any eventual property sale.

Pension contributions and tax relief

Private pension contributions made by a self-employed locum doctor receive basic rate tax relief at source (for personal pensions). If you are a higher or additional rate taxpayer, you claim the additional relief via self-assessment.

Pension contributions also reduce your net income for NIC purposes in some structures. For example, a self-employed locum contributing to a SIPP reduces the net profit on which Class 4 NIC is calculated, provided the contributions qualify as deductible.

The NHS Pension Scheme is available to sessional locum GPs who are members of a GP practice or who work under an NHS engagement, but not to all locums in all settings. If you are not in the NHS scheme, a SIPP or personal pension is the primary retirement savings vehicle. You should take specialist advice before contributing significant sums to ensure you are not breaching the annual allowance.

Student loan repayments

Student loan repayments for self-employed doctors are collected through self-assessment. The repayment is 9% of income above the relevant plan threshold:

• Plan 1 (2025/26 threshold): £26,065
• Plan 2 (2025/26 threshold): £28,470
• Plan 4 (Scotland, 2025/26 threshold): £32,745

For locum doctors, the self-assessment calculation uses net income (after expenses) as the income figure. Unlike PAYE where the employer deducts based on salary, the self-employed repayment can lead to an unexpected January bill if the locum has not set aside money through the year.

Accounting basis: cash basis and accruals

Most self-employed locum doctors can use the cash basis of accounting, which means income is recognised when received and expenses when paid. This avoids the complexity of accruals accounting and usually produces a simpler self-assessment. The threshold for mandatory accruals accounting (previously £150,000 turnover) has been abolished for most trades, and cash basis is now the default for income tax purposes.

The exception is if you operate through a company, in which case company accounting standards apply.

IR35 and off-payroll working

IR35 is relevant to locum doctors who operate through a personal service company (PSC). The off-payroll working rules (Chapter 10, ITEPA 2003) place the obligation to determine employment status on the engager (hospital trust, GP practice, or NHS framework) rather than the contractor.

Where a determination is made that a role falls inside IR35, the engager deducts income tax and NIC before payment. The locum doctor effectively receives a net fee equivalent to employment income. This eliminates the efficiency of the limited company structure for that engagement.

Status decisions are made on an engagement-by-engagement basis. Many NHS trusts have issued blanket inside-IR35 determinations; GP practices and some private hospital engagements may make different decisions. Always request a written status determination statement (SDS) before accepting an engagement through your company.

Payments on account and self-assessment

If your self-assessment liability is over £1,000 and less than 80% of it was collected at source, HMRC requires payments on account. For most locum doctors, this means:

• First payment on account: 31 January in the tax year following the liability year
• Second payment on account: 31 July
• Balancing payment: 31 January (with the following year's first payment on account)

Each payment on account is 50% of the previous year's liability. In the first year of self-employment, or after a significant income increase, the January bill can feel very large because it includes the year's tax plus 50% upfront for the following year. Building a cash reserve from the start avoids a January cash crisis.

Getting specialist advice

The take-home model above provides a clear structural picture. Your actual position depends on factors the model cannot capture: your NHS pension input amount, carry-forward from prior years, IR35 status per engagement, and any other sources of income. We work with locum GPs and hospital doctors across England and Wales and can prepare your self-assessment, advise on expenses, and help you plan for the January payments in advance.