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Locum Doctors - Advantages and Disadvantages of going limited

Advantages of being a Locum and working through your own limited company

If you’re considering becoming a locum doctor, then it is worth considering the advantages:

  • There is high demand which means you are very likely to have plenty of work
  • You can choose when and where to work
  • The opportunities available to you are potentially incredibly lucrative, from one day contracts to those lasting a year or more
  • The chance to learn new skills and broaden your experience
  • You can try different workplaces and learn which you prefer and how you like to work
  • Locums usually attract higher rates of pay that permanent staff
  • There are recruitment programmes which specialise in placing people overseas if you choose to pursue such a move

Working through a limited company

If you do decide that working as a locum is the right career move for you, then there are considerable advantages to operating through your own limited company.  

Choosing to work through a limited company will give you tax planning opportunities which would otherwise not be available to you. Sole traders are taxed on all their profits, less allowable expenses, whereas directors of limited companies are able to choose how much they withdraw from their companies. This means that you can spread your income from one tax year to the next, which is ideal for anyone who expects their annual income to fluctuate significantly from year to year. It is possible to withdraw funds from a limited company in order to keep your income beneath the tax threshold and spread your liability across two tax periods.

Similarly, it may be possible to organise your National Insurance Contributions to ensure that you are paying more than you need to as you might, for example, if you were undertaking work through an umbrella company.

A limited company protects your personal assets from any debts incurred by your business. As a sole trader, you and your business are treated as a single entity with no limits on your personal liability. A limited company is treated as separate from the individual, so long as it is properly run, and this can offer peace of mind and financial protection to anyone who wants to minimise their exposure to risk

The average rates for locums will vary depending on your speciality, demand for your skills and the area in which you are seeking work. There are rough averages available on this website: http://www.mpplocums.co.uk/locum-payrates.html but for quick reference here are some going rates for different grades within different disciplines. 

Grade A&E Anaesthetics Dental Obstetrics  Psychiatry
Associate Grade £67.59 £63.77 £59.94 £59.94 £59.94
Clinical Assistant £51.01 £51.01 £47.19 £47.19 £47.19
Consultant £86.72 £72.25 £73.97 £73.97 £81.63
FY1 (Formerly PrHO) £34.94 £33.16 £30.61 £31.88 £31.88
FY2 (Formerly SHO) £56.75 £46.55 £40.17 £36.99 £39.54
Hospital Practitioner £51.79 £51.41 £47.79 £48.17 £49.89
ST1 £50.75 £43.36 £43.36 £43.36 £43.36
ST2 £48.46 £48.46 £47.19 £48.46 £48.46
ST3 (Formerly SpR) £58.22 £53.56 £51.65 £49.74 £49.74
Staff Grade £53.56 £57.39 £45.91 £47.19 £55.15
GP £76.52 £76.52 £76.52 £76.52 £76.52

If you want an idea of how much of your pay you could end up with, then our Limited Company take home calculator can help you to work out what you could be earning.

There is a certain level of administration needed to set up and trade as a limited company, however this could take as little as 15-20 minutes a month. With advice from our experienced accountants, our clients usually find that they manage the admin easily and the savings they make are more than worth it. It is important to note that, whilst forming a limited company can save you money on your tax bills, it is an entirely legitimate way of managing your finances and in no way similar to the tax avoidance schemes which HMRC investigates for using improper methods to minimise tax bills.

For more information on how to go about forming your limited company, our Limited Company Formation page has all the information you need. 

How to find work

The high demand for locums means that most find it relatively easy to find work. Registering with an agency is often the simplest way to find placements, but it is worth checking a few simple details to ensure you get the contracts that you want:

  • Which hospitals do they usually work with?
  • Do they have guidelines on pay rates?
  • What are their payment terms?
  • Are there any compliance practises that their company conforms to?
  • Ask for details of their terms and conditions and any preregistration requirements they may have.

It is also worth checking whether they have any references from clients as well as locums, and checking with colleagues or other reviews to ascertain which agency might be most appropriate for you. Many people prefer to register with only one agency, or at most two, as that allows them to build a long-term relationship which can be the best way to find the placements that work best for you.

Charging VAT for your service

In most cases, locum doctors will not need to charge VAT on their services, but this will depend on the kind of contract they have.

If you are a locum who works directly with patients in a hospital setting, then you are exempt from VAT and therefore will not need to add it to your bill.

However, if you are not treating patients and instead are responsible for performing administrative tasks, working in HR or a managerial position where you are not coming into direct contact with any patients then you would need to charge VAT for your services.

HMRC have a section on how VAT is applied for locum doctors which goes into further detail about the circumstances under which VAT is payable here: Health Professional.

Thinking of becoming a locum? Looking to appointment an accountant?

Easy Accountancy charges a fixed fee of only £90 plus VAT a month for a simple limited company.

We don’t want our clients to be scared to contact us and potentially lose out on valuable tax saving advice, which is why we charge an all inclusive fixed fee package of £90 plus VAT a month, for a simple limited company. It’s important when you first start out as a freelancer that you run your business in the best way possible. As a start up you’ll probably have lots of questions, and will likely appreciate the fact you can call your accountant as many times as you like without the fear of racking up large bills.

For more advice on how Easy Accountancy can help you, please call us on 0500 234111 / 01442 275767 or heather@easyaccountancy.co.uk.

Why Clients Choose Easy Accountancy

Easy Accountancy offers a low cost, fixed fee accountancy package with all clients receiving their own dedicated, friendly, approachable accountant.

All of our accountants specialise in providing accountancy services to the self-employed, freelancers, sole traders, small to medium sized limited companies and private individuals. All accountants are employees of Easy Accountancy and we never outsource or offshore work.

Our low cost, all-inclusive fixed-fee accountancy service includes unlimited access to your own dedicated accountant throughout the year and covers all your business and personal tax affairs needs.

All our accountancy services include:
  - Unlimited access to your accountant
  - Ongoing advice on how to manage your business
  - Proactive tax advice throughout the year
  - Updates and reminders so you'll never miss a deadline
  - Free bookkeeping software

As a sole trader our fees start at just £30 + VAT a month, for this you receive the above plus:
  - Completion of your Self-Assessment tax return
  - Advice on how much Income Tax to pay
  - Guidance on National Insurance contributions

As a limited company our fixed fee packages are bespoke to your needs, however typically you’ll receive the above, plus:
  - Completion of your year end accounts*
  - Completion and submission of your annual return Companies House
  - The director/s Self Assessment tax return
  - Payroll bureau
  - Dividends and corporation tax computations

We’ve saved our clients up to half on their accountancy bills – if you’d like a quote, click on the quote me button to the right of this page. Alternatively, call us on 0500 234111 / 01442 275767 or email heather@easyaccountancy.co.uk.

*If you would like us to complete your company year end accounts we simply ask that you have been a client of Easy Accountancy for one year or have made 12 monthly payments.