Key financial issues for locum GPs

Specialist accountant Vicky Earnshaw explains the key financial issues that GPs need to be aware of if they undertake locum work, including advice on setting your rates, invoicing, expenses and tax.

Close-up image of UK pound coins and bank notes
(Photo: Zedelle/Getty Images)

Starting out as a locum GP can feel very daunting. You may never have had to worry about invoicing, saving for tax, managing your own pension contributions and record keeping, so you may not know quite where to start.

None of these need be a big task; preparing in advance and being well organised will get you into all the best routines. Before you know it, managing your own locum business will feel like second nature.

Considering the following key areas when you start locum work will help you with this all-important preparation.

Business structure

The first task is to decide on your business structure. For most, the decision is between self-employed or setting up a limited company. 

It is advisable to engage with an accountant to help with this decision as it will have lasting, significant implications for you and your finances. They will take your circumstances and needs into account to structure your business in a way that’s right for you and your goals.

When self-employed, you and your business are one and the same.  A limited company, however, is a distinct legal entity; separate to both those that run it and own it, i.e. separate to yourself as both director and shareholder.

There is never a one-size-fits-all approach to this decision. It depends on personal circumstances and financial objectives. Tax is often the driving force but a key point is that you cannot pension your locum work from a limited company. 

The significant majority of locum GPs are self-employed. This is because for most, the pitfalls of a limited company outweigh the benefits. This applies equally to full time locums and those who perform locum work in addition to salaried roles.

Examples of when a limited company can produce tax savings include where profits are in excess of £100,000; where a spouse has little to no income or where longer-term and retirement planning is the goal.

The pitfalls include increased admin, higher accountancy costs and difficulty extracting profits from the company. There are also increased HMRC enquiries and anti-avoidance legislation to deter against the use of limited companies as a means of seeking a tax advantage.

Owing to the strict legal obligations concerning both the set up and operation of a limited company, it is all the more essential to seek the assistance of an accountant before pursuing this route.

Negotiating your rates

Some practices and agencies will have fixed terms for how much they are willing to pay their locums and what the payment terms are.  Outside of this it will be open to negotiation between you and each practice with demand and supply being the biggest influencing factors. 

That said, the range of rates typically fall within a fairly narrow spectrum. One of the factors that may influence your negotiation is whether or not you are pensioning the work. This is because the employers’ element of the pension is a further cost borne by the practice on top of your fee.

This means that if you are not charging for the pension you may be able to negotiate a higher fee.  This decision will of course have an impact on the value of your pension on retirement and should not be taken lightly.  You may benefit from consulting with an independent financial advisor on this matter.


On either a weekly, monthly or engagement period basis, you should send your invoice to the practice.  On this you should show the dates and times of sessions worked, your fee as agreed and your payment terms.

You will also need to include some other basic information including your name, address and contact information, the practice name and address, the invoice number and invoice date and last but not least, your account details for payment. 

If you are pensioning your work you should also show the pensionable element of the pay (being 90% of the invoice value) and the employers’ pension contributions (being 14.38% of the pensionable amount).  There are additional requirements for invoices from limited companies.

There are various locum software packages available for a minimal cost which can generate invoices for you and store them on the software.  Most of them can also prepare the Locum A and Locum B forms that you will need if you want to pension your locum work.  

Regardless of whether you use such an invoicing tool or not, you should always use sequential numbered invoices which help you and your accountant keep track of invoices raised and payments received.


One of the benefits of working as a locum in addition to or instead of a salaried role is that there is much broader scope for obtaining tax relief on expenses and this can carry some value. The type of expenses which are eligible for tax relief for locums include the following:

  • Professional indemnity insurance
  • Locum software
  • Professional subscriptions
  • Computer expenses
  • Courses and conferences together with associated travel, accommodation and meal costs
  • Medical equipment and doctors’ bags
  • Postage, printing and stationery
  • Accountancy fees.

Other valuable expense claims for locums include an amount for using your home as an office; a percentage of costs associated with your mobile phone, home telephone and broadband and certain travel expenses.

Your accountant will be able to help you to determine the appropriate amounts for these specific to your circumstances and consider any other appropriate tax reliefs due.


When you start locum work, it is advisable to create two new bank accounts; one current account and one savings account. Use your current account for locum income, expenses and pension contributions.

At the end of each month you should then transfer a percentage of your locum income into the savings account which you will use to pay your tax. 

Record keeping

You should always keep records of invoices raised and receipts of expenses incurred. These will not only assist your accountant in drawing up your accounts and tax returns, but will also serve to evidence your transactions should HMRC enquire into your tax affairs. 

Bank statements can help evidence both of these but should never be relied upon as the sole documentation.

Saving for tax

When you start your locum business, whether as self-employed or via a limited company, you will need to start submitting tax returns and paying tax.  

The best possible way to prepare is to always set aside a portion of each fee to save towards your tax bill. You should then always have enough to pay your tax bill when it falls due. There is not a set, flat rate amount that everyone should save as it depends on your income levels and working arrangements. Your accountant will be able to calculate the applicable percentage for you.

The key tax payment deadlines are 31 January and 31 July.  If you have a limited company, you will also have a further deadline in relation to corporation tax which is usually nine months and a day after the end of your accounting period.

Preparing tax returns

The purpose of a tax return is to disclose income earned and expenses incurred during the tax year, calculate your tax due on the profits and communicate this to HMRC. 

If you are self-employed you only need to complete a personal tax return.  On this you must disclose all your locum income and expenses, together with any other income or gains (e.g. from salaried roles and investments) for the whole tax year. The tax year runs from 6 April to the following 5 April. 

Income tax and national insurance contributions are applied to the net profit derived from your locum accounts, so income less allowable expenses.  When you pension your locum work, the pension payments can be deducted too.

If you operate via a limited company you must submit corporation tax returns to disclose your locum income and expenses in the company and pay corporation tax on the profits. Annual accounts must also be submitted to Companies House. You would still also need to prepare a personal tax return and this would include dividends received from your company together with income received from salaried roles and any other income or gains, e.g. from investments.

The deadline to submit your personal tax return is 31 January following the end of the tax year.  The corporation tax return deadline is 12 months after the end of the accounting period.

IR35 and employment status

HMRC has become increasingly keen to crack down on individuals and businesses alike from avoiding tax by inferring self-employed or contractor status, rather than that of employee.  Employment status isn’t merely a matter of choice, but one of fact, based on your working relationship.

For most locum GPs this should not be an issue, but should you be asked to attend a practice regularly or provide fixed term cover, e.g. maternity cover it may be something to consider.

In brief, if your working relationship with the GP practice is essentially that of an employee, HMRC will seek to tax you as one regardless of how you class yourself. It affects the type of tax and national insurance contributions you pay and how you pay it. It also affects your entitlement to benefits and may affect your employment rights.

If you think you may be affected by this you should discuss your concerns with the practice and your accountant.

Choosing an accountant

The best time to engage in the services of an accountant is before you start locum work, not after. That way you can benefit from their expertise to help get you up and running and off to a great start.

Your accountant will help you decide on the best business structure for you; tell you how much to set aside for tax, prepare and submit your accounts and tax return; liaise with HMRC on your behalf and tell you how much tax to pay and when.

There are many niche aspects to tax and pensions for medics. An experienced medical accountant will be able to guide you through the intricacies of pension arrangements for locum GPs and ensure you are obtaining the maximum tax relief on your pension contributions.

You should choose an accountant that is regulated by a professional body. The benefit of having a suitably knowledgeable and qualified medical accountant should prove invaluable and far outweigh the cost of them submitting your tax return. 

Most will be happy to have an initial chat with you for free. This is also a good opportunity to assess their value to you and how helpful, professional, friendly and approachable they are to ensure a good working relationship.

  • Vicky Earnshaw, founder of VE Medical, is a chartered accountant and chartered tax advisor specialising in locums GPs, salaried GPs and portfolio GPs and has a wealth of knowledge and experience of accounts, tax and NHS pension compliance. Call or WhatsApp 07436 899 890 or email

Have you registered with us yet?

Register now to enjoy more articles and free email bulletins


Already registered?

Sign in

Follow Us:

Just published

External wall of GP surgery with wording 'medical centre'

‘Utterly toxic’: GPs speak out over abuse and physical attacks on practice teams

GPs have condemned a rise in verbal and physical attacks on practice staff - warning...

Artist's image of a spiked virus

Javid warns of 'substantial risk' from new COVID-19 variant

The highly mutated COVID-19 variant B.1.1.529 'may pose a significant risk to public...

Desk with lettering 'LMC conference'

LMCs reject 'outdated' GMS contract and demand move to item of service payments

LMCs have voted to scrap the 'outdated and inadequate' GMS contract and to replace...

GPs at an LMC conference waving green voting cards in the air

LMCs demand ringfence on enhanced services cash and clear GP representation in ICSs

LMCs have called for a ringfence on enhanced services funding, along with a guarantee...

Close up of hands typing on a computer

Practices should not be required to provide online consultations, say LMCs

Online consultations should no longer be a part of the GMS contract and targets for...

Sign outside BMA House

More than half of GP practices prepared to pull out of PCNs, BMA ballot shows

More than half of GP practices in England are prepared to opt out of the PCN DES...