Advantages of being a locum and working through your own limited company
Firstly what are the benefits of becoming a locum doctor:
- Virtually guaranteed work due to the huge demand.
- Freedom to work when and where you want.
- Lucrative long or short-term locum opportunities from one-day to one-year.
- Opportunities to expand your skills and experience.
- Opportunities to try different places of work.
- Higher rates of pay.
- Overseas recruitment programmes.
Working as a locum through your own limited company certainly has its perks too. 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
Any accountant will tell you that working through your own limited company is the most tax efficient way possible. However, you shouldn’t get a genuine limited UK company confused with some of the rather unusual and strange tax schemes currently being offered. Realistically if you live in the UK, work in the UK and get paid in the UK you’re going to have to pay tax in the UK. There are a host of alternatives but HM Revenue and Customs are clamping down on tax avoidance schemes so you’d do well to avoid them. Remember you and only you are liable for your taxes despite what anybody else tells you.
Savings made via National Insurance
If you were to work through an umbrella company (like a payroll bureau) 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.
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, you’ll need to:
• put aside an amount per month for tax bills
• understand what type of taxes to pay and when they will need to be paid
• learn about what expenses you can claim
• you’ll need to open a business bank account
• and may need public liability insurance / professional indemnity insurance?
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 the 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 don’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.
Finding work as a locum
Due to the high demand for locum’s it shouldn’t really be an issue sourcing work. But before registering with an agency, you might find the questions below helpful.
- What NHS Hospital do you regularly supply locum doctors to?
- What are your general guidelines on locum pay rates?
- What are your payment procedures?
- What compliance practises does your company follow?
- Does your agency have any references from clients and locum doctors regarding your services?
- Please, can you send me your company terms and condition?
- Do you offer a “preregistration form”? (This form is an agreement between the doctor and the recruitment agency detailing the doctor’s exact locum requirements).
We recommend dealing with only one agency (two maximum). Some people feel dealing with only one agency restricts their job options, however, this means you will build a strong relationship with them ensuring they are looking for the best possible positions for you.
When do I charge VAT for my services?
Most locum doctors do not need to charge VAT for their services, however, this does depend on your contract.
For example, if you are a Locum Doctor working for a hospital directly dealing with patients you would be exempt from VAT, basically, you would not have to charge VAT for your services, meaning your income is entirely yours, no deductions made.
However, if you are a locum doctor performing an HR/Office/Managerial advisor position, where you are not treating patients directly, you will need to charge standard VAT rate for your service.
Visit the HMRC website for a full breakdown of how VAT is applicable for Locum Doctors: Health Professional.