Key takeaways
- Most locum doctors are self-employed sole traders, paying Income Tax and Class 4 National Insurance through Self Assessment; others trade through a limited company or are paid via agency or umbrella PAYE.
- Freelance GP locums working directly for practices can pension locum income via GP Locum Forms A & B: pensionable pay is 90% of the fee, with contributions paid to PCSE by the 7th of the following month.
- Forms older than 10 weeks are rejected (the 10-week rule), and limited company locum income cannot be pensioned via Forms A & B at all — incorporating usually means giving up NHS Pension accrual on locum work.
- IR35 only applies when you work through an intermediary: agency or trust work via a limited company is frequently inside IR35, while direct-to-practice sole trader GP locum work sits outside IR35 entirely.
- Locums can claim GMC fees, medical indemnity, professional subscriptions and business mileage at 45p/25p per mile — but ordinary commuting and training in a brand-new specialism usually don't qualify.
Locum work gives doctors control over where and when they work, but it makes your tax position more complicated than a salaried post. Instead of PAYE quietly handling everything, you choose a trading structure, file your own returns and, if you are a GP locum, manage your own NHS Pension contributions.
This guide explains how locum doctor tax works, the difference between being self-employed and trading through a limited company, and the NHS Pension trade-off that catches many locums out when they incorporate.
How locum doctors are taxed
Most locum doctors work under one of three structures, and your tax treatment follows the structure rather than the job title:
- Self-employed (sole trader). You invoice practices or trusts directly, declare profits on a Self Assessment tax return, and pay Income Tax plus Class 4 National Insurance. This is the standard set-up for freelance GP locums working directly for GP practices.
- Limited company. Your company invoices for your work and pays Corporation Tax on its profits; you take income as salary and dividends. Common among hospital locums working through agencies, but IR35 can remove most of the benefit, and it has a serious NHS Pension consequence covered below.
- Agency or umbrella PAYE. The agency or umbrella company employs you and deducts tax at source. The simplest option administratively, but usually the least efficient once umbrella fees and employment costs come out of your headline rate.
| Self-employed | Limited company | Agency/umbrella PAYE | |
|---|---|---|---|
| Income Tax | On profits via Self Assessment | Corporation Tax on company profits, then Income Tax on salary and dividends | Deducted at source through PAYE |
| National Insurance | Class 4 on profits | Employee and employer NI on salary; none on dividends | Employee NI, with employer costs often passed on by umbrellas |
| NHS Pension on locum work | Yes for freelance GP locums working directly for practices (Forms A & B) | No — Forms A & B cannot be used for company income | No for agency locum work |
| IR35 risk | None — IR35 does not apply to sole traders | Yes — for NHS bodies the client decides your status | None — already taxed as employment |
| Admin | One Self Assessment return a year | Company accounts, Corporation Tax return, payroll and Self Assessment | Minimal |
Which structure wins depends on your day rate, the mix of engagements and how much you value continuing NHS Pension accrual. Specialist medical accountants will usually model all three before recommending one.
Self-employed locum: registering and Self Assessment
If you start locum work as a sole trader, register for Self Assessment with HMRC by 5 October following the end of the tax year in which you started. Your first online return and tax payment are then due by 31 January.
You pay Income Tax on profits (locum fees minus allowable expenses) above the £12,570 personal allowance, plus Class 4 National Insurance — 6% on profits between £12,570 and £50,270 and 2% above that in 2025/26 (check the current year's figures when budgeting). Profits above £50,270 move into 40% higher-rate tax, which many full-time locums reach.
The biggest cash-flow surprise is payments on account. Once your Self Assessment bill exceeds £1,000, HMRC requires two advance payments towards the following year, each half of this year's bill, due on 31 January and 31 July. In your first year that means roughly 150% of a year's tax falling due at once. Use our self-employed tax calculator to estimate the liability, and set aside 25–30% of fees as you earn.
If you also have salaried NHS work, agency PAYE shifts or other income, it all goes on the same return — our self assessment tax return guide walks through the deadlines and filing process.
The NHS Pension question: Forms A & B
For GP locums, pension treatment is often the deciding factor between structures. Freelance GP locums working directly for GP practices can pension their locum income in the NHS Pension Scheme using GP Locum Forms A and B. The mechanics:
- Form A records each engagement and is signed by the practice to confirm the fees paid; Form B is your monthly summary of pensionable income and contributions.
- Pensionable pay is 90% of the locum fee — the remaining 10% is treated as deemed expenses.
- You pay both the employee and the employer contributions yourself, to PCSE (NHS England), by the 7th of the month after the month you were paid.
- The 10-week rule: forms older than 10 weeks are rejected, and that income permanently loses its chance to be pensioned.
Now the critical trade-off: locum income earned through a limited company cannot be pensioned via Forms A and B. Incorporating usually means giving up NHS Pension accrual on your locum work entirely. Given the value of a defined-benefit NHS Pension, that lost accrual can comfortably outweigh any Corporation Tax saving — run the numbers before you incorporate, not after.
Higher earners should also watch the pension annual allowance: £60,000 for 2026/27, tapered once threshold income exceeds £200,000 and adjusted income exceeds £260,000. The allowance reduces by £1 for every £2 of adjusted income over £260,000, down to a minimum of £10,000 at £360,000. Our guide to the NHS Pension annual allowance explains how this interacts with NHS Pension growth.
Limited company for locums and IR35
A limited company can still make sense for some locums. Corporation Tax has been 19% on profits up to £50,000 and 25% above £250,000, with marginal relief in between, since April 2023, and a company lets you control when you draw income. It tends to suit hospital locums on strong day rates with genuinely outside-IR35 engagements, doctors who are not building NHS Pension on their locum income anyway, or those combining locum shifts with private practice.
IR35 (the off-payroll working rules) only applies when you work through an intermediary such as your own limited company. Since 2017, public sector bodies — including NHS trusts — determine your IR35 status, not you. In practice:
- Agency or trust locum work through a limited company is frequently assessed as inside IR35, meaning tax and NI are deducted as if you were employed — which removes most of the company's advantage for that engagement.
- Direct-to-practice GP locum work as a sole trader sits outside IR35 entirely, because there is no intermediary for the rules to apply to.
- Outside-IR35 company engagements do exist, but the client's status determination decides — confirm it in writing before building a structure around it.
If the numbers stack up after the pension and IR35 questions, our guide to setting up a limited company covers the process — but take advice first if you hold NHS Pension membership.
Expenses locum doctors can claim
Self-employed locums can deduct costs incurred wholly and exclusively for the business. Common claims include:
- GMC registration fees and revalidation-related costs.
- Medical indemnity — defence organisation subscriptions such as MDU, MPS or MDDUS.
- Professional subscriptions on HMRC's approved list, such as the BMA and royal colleges.
- Business mileage at HMRC's approved rates: 45p per mile for the first 10,000 business miles each tax year, then 25p per mile.
- Accountancy fees and business insurance.
- Equipment and admin costs — medical bag, stethoscope, and a reasonable proportion of phone and home-office costs for the time you spend on invoicing and records.
Travel deserves care. Mileage between different practices or sites during your working week is generally claimable, but ordinary commuting — home to a single regular workplace — is not. If you work a long block at one practice, that site can start to look like a regular workplace and weaken your travel claims.
CPD has a nuance for the self-employed too: courses that update or maintain skills in your existing area of practice are generally deductible, but training that gives you a completely new specialism or qualification may not be. Keep records and check the position before claiming large course fees.
Common locum tax mistakes
- Missing the 10-week rule. Late Forms A & B are rejected and the pension opportunity is gone. Make it a monthly routine: forms signed, contributions to PCSE by the 7th of the following month.
- Ignoring payments on account. Your first Self Assessment bill can be roughly 150% of a year's tax. Set money aside from your first invoice.
- Incorporating without checking the pension impact. A Corporation Tax saving rarely beats losing defined-benefit NHS Pension accrual on your locum income.
- Claiming ordinary commuting as business mileage. Home to a regular workplace is not deductible, however the journey is logged.
- Not tracking mixed income. Agency PAYE shifts arrive taxed; direct locum fees arrive gross. Both go on the same return, and muddling them leads to under- or over-payment.
- Registering late. Miss the 5 October registration deadline and you risk penalties before you have even filed a return.
Locum tax is entirely manageable — the structure decision is just worth getting right first time. GoForma's specialist medical accountants work with locum doctors and GPs every day. Book a free accounting consultation to talk through whether sole trader or limited company fits your situation.