Let us take the stress out of Self Assessment
Get your tax return sorted by experts for only £200 £100+VAT!
Take the stress out of Sole Trader Accounting, for just 1%+VAT of your money earned. No monthly subscriptions! With CrunchONE
Get 25% Off Crunch Pro and Premium for the first 3 months!

Could a limited company be the right choice for locum doctors?

Is a Limited Company Right For Locum Doctors? (Image of a doctor and patient).
Picture of crunch software on mobile

Professional Bio Templates & Examples

Create a compelling professional narrative for a proper, attention-grabbing introduction.
Website bios
Speaker intros
Professional Profile

Many locum doctors in the UK work via NHS and locum agencies which handle their pay, much like a direct employer would. However, there are other ways that locums or freelance GPs can go about finding work and getting paid for their services.

The locum doctor can provide their services in different ways, including direct employment, working via a limited company, as a sole trader or even via an umbrella company. And of course, the aforementioned agency route.

NHS and locum agencies

By providing services through an NHS or locum agency, health workers pay employment tax at source under normal PAYE rules. This is fine for many as they won't have to do any accounting or tax preparation. On the downside, it's not the most tax-efficient way of working as a freelancer, and you're restricted in the type of expenses you can claim.

For healthcare professionals moving to the UK from overseas, it may initially be the preferred option as some agencies offer specific help and guidance about residency and the right to work in the UK.

Limited company option for locum doctors

Running a limited company usually provides the most tax-efficient option and gives you the opportunity to be the director of your own company. For most people, a limited set-up requires the services of an accountant - unless you're particularly sharp on tax filing procedures and day-to-day administration.

Tax efficiencies are secured when you pay yourself the right combination of dividends and salary as explained in our article. You also get to claim legitimate business expenses which can reduce your tax bill. One important thing to note is that you cannot contribute to the NHS pension scheme if you work through a limited company, which can be an important factor in your decision. You are able to contribute to a private pension scheme through your limited company and this can be very tax-efficient.

In the right hands, a limited company can be a simple way of doing business. Unfortunately, some accountants will leave you adrift in a sea of receipts, invoices, and documentation which you then have to gather up in an orderly fashion before sending it all over for them to process. However, if you have an accountancy service which keeps all your records safe and secure online, whilst offering expert help and guidance, limited company life becomes incredibly simple.

Before deciding to set up your own limited company, you need to understand how HMRC will view your employment status. If your contracts are caught under IR35 rules (depending on whether you are in the private or public sector), you’ll pay more employment tax.

In simple terms, if your contract is ‘inside IR35’, it means you are treated as an employee of your client. Your company’s income from a public sector client will be treated as employment income for you as an individual and will be subject to National Insurance and Income Tax deductions. Your end client will pay Employer National Insurance as well.

If you’re supplying your services to NHS practices then each practice that you work for as a locum will need to check whether your contract falls within the IR35 legislation using an online HMRC tool and let you know the outcome.

HMRC has said: “The rules apply if a worker provides their services to a client through an intermediary, but would be classed as an employee if they were contracted directly.” If you work regularly for just one practice and do the same sessions every week, you may really be an employee and will be caught by IR35.

If your contract is deemed to be ‘inside IR35’, the practice will have to pay your invoice after deducting all the necessary employment taxes. You’ll then need to make sure that you account for the net payment correctly and avoid being double-taxed.

How can GP locums ensure they do not fall within IR35?

The best way to evidence your assignment is outside IR35 is to ensure your contract, and the working practices you follow with your clients, show you are an independent contractor and not a ‘disguised employee’. HMRC will ‘look beyond’ your contract towards your working practices if they query the IR35 status of an assignment.

  • Do not work for one practice ‘regularly’
  • If you need to use a substitute because you can't make a session, you should be responsible for supplying the substitute. A substitute GP should be able to provide the same services originally offered by you. This substitute cannot be someone who regularly works for the same practice you work at. The practice will then pay your company and you will, in turn, pay the substitute for doing the session.
  • You should not receive any type of employment benefits from practices you work for, such as sick pay, holiday pay, or staff away days.

Sole trader option for locum doctors

The major advantage of being a sole trader is that it’s the simplest way of running your own business and you can still contribute to the NHS pension scheme. You also get to claim expenses (similar to working as a limited company with a few differences) and means you don’t have any IR35 concerns.

The major disadvantage is that it’s not as tax efficient as a limited company. Depending on how much you earn, you could keep a lot more of your income with a limited company. As a sole trader, you’re liable for employment taxes (Income Tax and National Insurance) whereas a limited company director can take income by way of a dividend which attracts a lower rate of Income Tax and has no National Insurance to pay. It’s also possible to pay yourself a tax-efficient salary which does not attract any National Insurance up to the government’s threshold.

As a sole trader, you’ll still probably find life is much easier with a handy online sole trader accounting system and expert advice. Our sole trader software even prepares your Self Assessment for you to make your life easier.

Umbrella companies for locum doctors

Working freelance via an umbrella company is much like an agency set-up where the umbrella company sorts out your employment tax, leaving you to simply hand in timesheets. Naturally, they’ll charge for the payroll service they provide, and it’s administered on a PAYE basis. So, it’s not as tax efficient as a limited company or sole trader route (and you’ll have to pay to use the timesheet and payroll services).

If you see an umbrella company promising high amounts of take-home pay, through an offshore company for instance, please be very wary. HMRC keeps such arrangements under constant review and has closed many such schemes in recent years. You may find yourself liable to pay outstanding tax going back a number of years if HMRC concludes you should have been paying employment taxes.

Our Umbrella service can take care of everything for you, leaving you to simply hand in your timesheet and let us deal with making sure you get paid and taking care of the tax and National Insurance for you.


There’s a range of options for locum doctors in the UK. At Crunch, whatever route you choose, we provide expert accountancy advice alongside our online software which enables you to automatically draw up invoices, easily record expenses and have a real-time snapshot of your income and expenses. By keeping all your accounting needs in one place, life as a limited company director is surprisingly easy.

Find out more about how Crunch works.

guide cover for "8 great ways accountancy can help your ecommerce business"

Unlock your free ecommerce business guide!

Expert Insights
Actionable Tips
Strategic Advice

To receive our guide on valuable insights into the world of expenses for limited companies please submit your details below.

Please enjoy our guide on 8 Ways Great Accountancy Helps ecommerce Businesses Succeed. Click below to download our PDF guide.
Oops! Something went wrong while submitting the form.

By submitting you are agreeing to be contacted by Crunch.

Speak to an accounting expert

If you're unsure what level of support you need, our friendly team are on hand to help you pick the right package for you.
Self Assessment tax returns done for you, from just £200 £100+VAT
Take the stress out of Sole Trader Accounting, for just 1%+VAT of your money earned. No monthly subscriptions! With CrunchONE
Get 25% Off Crunch Pro and Premium for the first 3 months!
Share this post
Ross Bramble
Content Executive
Updated on
March 22, 2021

Knowledge Hubs

Take control of your accounts, today

Crunch’s effective software package includes being able to talk to an expert client manager and a Chartered Certified Accountant. You can count on Crunch to make you productive and profitable.
Picture of crunch software on mobile

Professional Bio Templates & Examples

Create a compelling professional narrative for a proper, attention-grabbing introduction.
Website bios
Speaker intros
Professional Profile

Unlock Your Free Limited Company Expense Guide!

Expert Insights
Actionable Tips
Strategic Advice

Save your seat! Live e-commerce webinar

Register and soak in the wisdom from top industry leader! June 27, 2024 1:30 PM
Dive into e-commerce basics
Expert industry insights
Practical tips and savvy tricks
Pro Tip
Looking for a dedicated accountant?

Our Enterprise packages offer tailored support for you and your business. You can focus on your business, we'll crunch the numbers.

Pro Tip
Boost your business finances with our Ltd Company packages!

Award-winning software with support from expert accountants

Pro Tip
Take the stress out of Sole Trader Accounting

Just 1%+VAT of your money earned. No monthly subscriptions! With CrunchONE

Pro Tip
Get 50% off your Self Assessment

Get your tax return sorted by experts for only £100+VAT!

Pro Tip
Using cloud-based accountancy software to manage your finances gives any small business a big advantage!

At Crunch we provide affordable cutting-edge, easy-to-use software with real human support from expert chartered accountants. That’s probably why 81% of our clients would recommend Crunch.

Pro Tip
Did you know - you have access to a Chartered Certified accountant for free on our paid subscriptions?

Book a call with our one accountants and get your questions answered. Just £25.50 +VAT for Crunch Free users.

Pro Tip
Get 50% off your Tax Return!

Crunch’s Self Assessment service provides an expert accountant to complete, check, and file your Self Assessment for you for just £100 +VAT.

Pro Tip
Did you know - We have a free plan that is great for sole traders and limited companies?

Why not see for yourself? It’s simple and easy to use and 100% free.