Accountants for locum Doctors, Vets, Nurses and the medical profession
Advantages of being a Locum and working through your own limited company
Working as a locum through your own limited company certainly has its perks, let’s take for example take home pay.
Basically, if you are a locum working through your own limited company your take home will be anywhere between 75% - 80% of your daily rate, for example:
Daily rate £200 take home between £150 - £160
Daily rate £300 take home between £225 - £240
Daily rate £400 take home between £300 - £320
Daily rate £600 take home between £450 - £480
The main savings with a Limited Company over an umbrella are around National Insurance and the Flat Rate VAT Scheme (please note - some of your work may be not be VAT-able).
National Insurance Savings
With an umbrella company you will pay both employees and employers NI (Employers NI is 12.8% of your salary, and employees NI 11% for the first £770 a week, and 1% thereafter (both after tax free personal allowances).
On a typical contract of say £350 per day you will pay around £300 a week in NI through an umbrella company whereas with your own Limited Company you will pay just £30, so the NI savings alone come to about £12,000 a year assuming a 45 week working year.
If you are on £200 per day you'll save £9,000 or if on £600 a day save £20,000.
Flat Rate VAT Scheme
This is an incentive provided by the government to help simplify taxes and means you charge VAT on your invoices at 17.5% but only pay back the Revenue in your first year 12% (depending upon your industry) of the gross amount and 13% in subsequent years.
This provides the following additional income (based on a 45 week working year):
£200 per day contract - £1,530 extra per year
£350 per day contract - £3,670 extra per year
£600 per day contract - £4,590 extra per year
On top of NI and VAT you'll also earn interest on your savings (savings put aside to pay for your taxes) plus have access to a broader scope of expenses than if you use an umbrella company.
The above illustrations apply if you work outside IR35, however even if some or all of your work is inside IR35 (this is dictated by your contract and working practices, we would be very happy to help you to understand more about IR35), it may still be better off than using an Umbrella company.
So that’s take home pay - and we haven’t even mentioned: freedom, variety of work experience, long term planning, opportunity for travel and different working environments. However, working through your own limited company and being a locum isn’t for everybody. Being a director of your own limited company does come with responsibility, find below a few things to consider:
• Amount to put aside per month for tax bills
• What type of taxes will I have to pay and when will I have to pay them?
• What expenses can I claim and how do expenses affect my take home pay?
• Do I need to set up a business bank account and what happens if I don’t?
• Do I need public liability insurance or Professional indemnity?
• How do I keep track of money coming in and going out (your Easy Accountancy accountant will provide you with a simple spreadsheet to help you with this)
• How does VAT work? Who claims it, pays it and should I be on the flat rate scheme?
• What’s the typical time to wait for payment and how and when do I invoice?
• Do I need to be concerned about IR35?
• What should I try and do before I start freelancing?
However, locums and other medical professionals tell us that after the flood of initial questions, the administration side of working through your own limited company only requires 15 – 20 minutes for month, providing that is you work with an experienced accountant. If you haven’t formed a limited company yet, the government has now made this surprisingly simple and it only takes five minutes.
So other than a bit of admin what are the downsides? Well, surprisingly few:
- The odd old fashioned comment about ‘You won't know; you're only the locum’ or ‘you’re not my doctor’, however these are becoming less frequent due to the sheer volume and proliferation of locums.
- Having to source your own work can sometimes be difficult. Agencies can help here and there's no shortage of these!
- Pay envy from co-workers - this is something that has affected locums, consultants and contractors in every industry.
Only you can decide if being a locum and working through a limited company is right of you. If you have any questions about working through your own limited company or would like any further advice please call our New Client Services Team on 0500 152 500 / 01442 232700 or e-mail rachel@sjdaccountancy.com.
About SJD Accountancy
SJD Accountancy is the UK’s largest accountants for locums, consultants, contractors and freelancers, we manage the tax affairs of over 10,000 clients, all of whom with through their own limited company.
We are the only national specialist firm of accountants with offices in all major UK cities, so you’ll never be far from your accountant. SJD also has more qualified staff than any other firm in our market, with qualifications from the following major tax and accountancy bodies - ATII, ATT, ACCA, CA, ACA, FCCA, ACMA.
You’ll also be pleased to know that we have won more awards for customer service and accounting excellence than any other firm in our market including: Accountancy Age Awards, PCG 'Quality Accountant' Accreditation, Best Accountant for Contractors three years running, Best Companies Awards to name just a few.
All of our clients receive our low cost fixed fee service which includes:
- Free face-to-face meetings with your own SJD Accountant - Tax is complicated which is why we offer everyone free face-to-face meetings in any city in the UK
- Unlimited access to your own dedicated personal SJD Accountant - No call centres, no outsourcing, no press one for this or two for that. Telephone, e-mail or meet your own dedicated accountant face-to-face.
- Advice on how to maximise your earnings and pay less tax through tax planning.
- Money back service guarantee - all your telephone calls and e-mails will be answered the same day or we will refund your monthly fee.
- Someone you trust to take care of your accounts with no worries about unpaid taxes.
- Specialised tax advice for your industry.
- Outstanding reputation - we have won more awards for customer service and accountancy excellence than any other firm in our market.
Our fixed fee package includes: completion of accounts, payroll bureau, dividends and corporation tax computations, personal taxation, free bookkeeping software, unlimited access to your accountant and all company returns for a fixed monthly fee of just £95 plus VAT which is one of the lowest prices in the market.
Appoint SJD Accountancy and never worry about your tax affairs again!
