Locum Accounting Made Simple: Tax Deductions and More

Accounting and taxation can feel overwhelming, especially for locum professionals navigating the complexities of self-employment or limited company structures. If you're a locum dentist, doctor, nurse, optician, or any other healthcare expert working in the UK, managing finances effectively is crucial. This blog is here to help simplify locum accounting, highlight key tax deductions, and offer actionable advice to reduce your tax liability while staying compliant.

Whether you’re just starting out or want to optimise your tax return, this guide has you covered.

The Basics of Locum Taxation in the UK

Understanding the type of employment structure that best fits your needs is the first step toward effective financial management.

Self-Employment vs. Limited Company

Self-Employment

Most locum professionals begin as self-employed individuals. You’ll need to register with HMRC, file a Self Assessment tax return each year, and pay Income Tax and National Insurance Contributions (NICs). This option is often simpler and works well for those with moderate earnings or those just starting out.

Limited Company

If your income grows or your work becomes more consistent, forming a limited company may become more tax-efficient. Many locum professionals opt for this model as it allows them to act as company directors, drawing a combination of salary and dividends to manage their tax liabilities. However, it involves more administrative work and record-keeping, which can be overwhelming without an accountant. For more details, check out this guide on self-employment vs limited company.

Real Example:

Sarah, a newly qualified locum optician, earns £40,000 annually. Operating as self-employed is simpler for her current income. However, if her earnings increase to £60,000, she may find setting up a limited company better aligns with her financial goals.

Key Tax Deductions for Locum Professionals

One of the key benefits of being self-employed or running a limited company is the ability to claim allowable expenses. These deductions reduce your taxable income and keep more money in your pocket. Learn more about tax deductions for locum professionals.

Travel Expenses

Locums often travel between multiple workplaces, and travel-related costs can be claimed. This includes mileage, train fares, and parking.

Example: David, a locum dentist, drives to various practices each week. By claiming 45p per mile for the first 10,000 miles, he reduces his taxable income by £2,500 annually.

Professional Fees and Subscriptions

Membership fees to professional bodies like the General Medical Council (GMC) or British Dental Association (BDA) are deductible.

Example: Priya, a locum GP, claims £400 yearly for her GMC fees, directly lowering her tax bill.

Work-Related Equipment

Items like stethoscopes, medical uniforms, and laptops used for work can also be deducted.

Training Costs

Keep up with CPD requirements? Training expenses for courses directly related to your role are tax-deductible.

Understanding VAT for Locum Professionals

Locum professionals may need to register for VAT if their turnover exceeds £90,000 annually. Check out information about VAT registration and guidance.

The Flat Rate Scheme

If you do need to register for VAT, the Flat Rate Scheme can simplify the process. Instead of calculating VAT for each purchase and sale, you pay a fixed percentage of your turnover.

Example: Alex, a locum nurse earning £90,000 annually, uses the Flat Rate Scheme to reduce admin and streamline compliance.

Record-Keeping Essentials

Efficient record-keeping is essential to maximise claims and stay compliant with HMRC. For more tips, visit CloudCo Group's Guide on Self-Employment.

• Receipts: Save all related receipts.
• Spreadsheets or Software: Use accounting software or a simple spreadsheet to track income and expenses.

Example: Emma, a locum physiotherapist, started using an app to scan receipts, saving her hours of headache during tax season while ensuring no deductions go unclaimed.

Common Pitfalls to Avoid

Missing Tax Deadlines

• Register for Self Assessment by 5 October.
• File your return and pay any tax owed by 31 January annually.

Failing to Set Money Aside for Tax

Set aside 25–30% of your income for tax and NICs to prevent last-minute stress.

Example: John, a locum pharmacist, didn’t save enough for his first tax bill and faced HMRC penalties he could have avoided with proper planning.

Why Seek Professional Help?

Not an accounting expert? No problem. Working with a professional accountant ensures you stay compliant while maximising tax efficiency.

• Maximise Tax Deductions: Ensure all allowable expenses are accounted for.
• Avoid Penalties: Stay ahead of HMRC deadlines and compliance requirements.
• Save Time and Stress: Streamline your financial admin.
• Proactive Financial Advice: Tailored strategies to optimise your earnings and reduce your tax burden.

How Virtue Accountants Can Help

Accounting may not be every locum professional’s strong suit, but it certainly is ours. At Virtue Accountants, we provide tailored online accounting services designed for locum professionals like you.

Take control of your finances today. Book a free consultation and see how we can help you simplify locum accounting and reduce your tax burden.