How tax works for locum doctors is one of those things nobody explains when you make the switch — and that gap can cost you a lot of money if you fill it in the wrong order.

Sole Trader or Limited Company — Which One Should You Be?

This is almost always the first question I get from locum doctors, and it is the right one to ask. The structure you operate under affects how you pay tax, how much you keep, and what rules apply to you. Getting it wrong from day one can mean an expensive fix later.

As a sole trader, you pay Income Tax and National Insurance on your profits through Self Assessment. As a limited company, the company pays Corporation Tax on its profits and you draw a salary and dividends — which can be more tax-efficient at higher income levels. But IR35 (more on that below) has changed the picture significantly for NHS locums working through a company, so the calculation is rarely straightforward.

IR35 and Locum Doctors — What the Rules Actually Mean

IR35 is shorthand for the off-payroll working rules, and it was introduced for public sector bodies in April 2017. In simple terms, if HMRC looks at how you work and decides you would be an employee if there were no company in the middle, you pay tax at employee rates — even though you are using a limited company. For NHS locums, this matters a lot.

A First Tier Tribunal case involving NHS locum urologist George Mantides showed that IR35 outcomes depend on the specific terms of each engagement — not a blanket rule. His company was found to fall inside IR35 for one hospital and outside it for another, based on the different working arrangements at each site. That tells you everything: you cannot assume your setup is fine without actually checking it.

What Expenses Can Locum Doctors Actually Claim?

This is where a lot of locums either leave money on the table or — worse — claim things they are not entitled to. Allowable expenses for locum doctors typically include: travel between different work sites (not from home to a regular base), professional subscriptions like GMC registration and medical indemnity, relevant training and CPD, and equipment you use solely for work. The key word throughout is ‘wholly and exclusively for business purposes.’

A cautionary case reported by AccountingWEB involved a locum doctor who claimed over £160,000 in travel and subsistence across three tax years — and lost at tribunal. HMRC found that the NHS hospital sites were treated as permanent workplaces for each engagement, meaning travel from home counted as ordinary commuting and was not deductible. The lesson is that travel claims for locums depend heavily on how your engagements are structured, not just the fact that you drive between hospitals.

Self Assessment — Deadlines and What You Need to File

If you are a sole trader or a director of a limited company, you need to register for Self Assessment and file a tax return each year. The deadline for online returns is 31 January following the end of the tax year. So for the tax year ending 5 April 2026, your return and any tax you owe are due by 31 January 2027.

You will also pay tax in two instalments on account — in January and July — based on the previous year’s bill. This catches a lot of newly self-employed doctors off guard. It feels like you are paying twice, but you are really just paying in advance for the current year. Getting good records in place from the start makes this much less stressful.