Tax relief for Locum doctors

Many Locum doctors work through agencies such as the NHS, which handle their pay and taxes in a very similar manner to a direct employer in that they are taxed at source under normal PAYE rules. In circumstance where a Locum doctor sets up and operates through a limited company it is possible to take advantage of tax reliefs that are not offered to other arrangements.

In the instance where a Locum doctor acts as a limited company, the company will have to pay corporation tax. The Locum doctor can pay themselves through a combination of a salary (tax-deductible expense) and dividends (out of post-tax profits).


The disadvantages of working as a Locum doctor in a limited company is that there are greater accounting and tax return requirements and you will need to maintain detailed records of your hours, rates, dates of contracts and expenditure.


Under rules known as 'IR35', a PAYE and NIC liability arises if a worker contracting through a company (or other intermediary) has the hallmarks of an employee – before 6 April 2017 liability rests with worker's limited company and not the organisation where the individual works.  

From 6 April 2017, where public bodies (including GMS/PMS practices) engage workers through a limited company responsibility to apply the intermediaries legislation falls on the public sector body or agency. For example, an NHS trust will have to review a Locum doctor’s circumstances and decide whether or not to withhold PAYE and NIC, as if the Locum were an employee.  

Contact us for specialist accounting advice for doctors