1. Get a personal tax account (Government Gateway sign in)
- If you’re doing your own Tax Return you will complete it via the personal tax account
- You can easily see what tax you owe and when
- You can check your NI record (and state pension entitlement/qualifying years)
- You can check your tax code and update this, if you’re employed
- You can use the gateway login to complete all sorts of forms
Lots of things!! Even if you decided to get an accountant to do your Tax Return for you, it’s still a really useful thing to have.
https://www.gov.uk/personal-tax-account
2. If you’re starting self-employment, you need to tell HMRC
HMRC won’t just know straight away!
You’ll need to tell them so that they will give you a Unique Taxpayer Reference Number (UTR), issue you with a Tax Return, and register you for self-employed National Insurance contributions.
If you don’t tell them by 5 October after the tax year you become self-employed, they can charge you penalties.
If you already complete a Tax Return for other reasons, you still need to tell them you’ve become self-employed – if you don’t then they won’t charge you the correct amount of national insurance:
- They may not update your record with qualifying years for state pension purposes
- This could affect your entitlement to maternity allowance (if relevant to you)
- If you’ve also had an employment in the year, they could overcharge you for national insurance (they do limit the maximum amount of National Insurance payable where you have more than one employment, or a combination of employment and self-employment, but only where you are correctly registered for self-employed national insurance)
To update them about becoming self-employed you can use an online form (part of the general ‘registering for self-assessment form), or if that doesn’t work for some reason, you can download a form called a ‘CWF1’.
https://www.tax.service.gov.uk/print-and-post/form/NICs_iForms/1.0/CWF1_20167/cwf1.xdp
3. Think about using software
Locum Deck, amongst a few others, is designed especially for Locums to help with bookkeeping (which broadly translates to recording all of your income and expenses), bookings, invoicing, and completing pension forms.
Everything is in one place, templates are set up to help with all the paperwork, and it will make it easy for you (or an accountant) to access a lot of the information that’s needed for your Tax at the end of the year.
BUT FOR IT TO BE EFFECTIVE, YOU NEED TO KEEP IT UPDATED. Which brings me to my next point…
4. Record keeping (in general)
You HAVE to keep records of your income and expenses.
HMRC will expect you to keep a record of all of your income and anything you claim as a deduction (expense) for around 7 years – you have to be able to show where all of your figures come from. This is especially important if you get an enquiry into your Tax Return. Without proper evidence HMRC will make adjustments to your figures to reflect what they think is reasonable (usually to their benefit).
If you choose not to use Locum software, you will need to think about how you record and keep information relating to your income and expenses.
Or, if you use Locum software for income, but not for expenses, you’ll need to think about how you’ll evidence your expenses – for example, keeping an email folder that you can save e-receipts to.
This sounds really simple, but if you devise a method of recording and evidencing income and expenses as you go along, it’s so much easier to access the information at the end of the Tax year – so please do this as you go (far less stressful than trying to do it all in one go, right before deadline day).
Also, Making Tax Digital (MTD) will eventually be brought in – there’s been several delays, but it will come about! When that happens, you’ll be required to keep digital records and make submissions quarterly (with end of year adjustments) so it would be best to get in the habit of at least using some kind of software which will enable you (even with bridging software) to make digital submissions when the time comes.
5. Expenses
Expenses against self-employment are more lenient than those you can claim against employment.
The rule is ‘wholly and exclusively’ for the purpose of the Locum business. This could include CPD courses (as long as they are related to your profession / your business), stationery, headset for video consultations etc.
If you use it for your Locum business, you should be able to claim it/a part of it against your Tax. Although I will throw in that there are some exceptions to this (most commonly around clothing costs and glasses).
Other than clothing and glasses, if you purchase something that has a dual use then you can usually claim a reasonable proportion that related to your Locum work (e.g. a mobile phone that you use for phone consultations and that you use personally). Again, you should be able to evidence the proportions you are claiming (in the case of a phone contract, for example, you could keep a phone log or sample log, to demonstrate the business proportion claimed).
Trading allowance – £1,000. You can claim this instead of expenses. If you earn less than £1k – this will reduce your earnings to £nil (can’t create a loss) and you won’t have to report it! If over, it can be used as a flat rate deduction.
6. Pensioning – time limits and forms (including Type 2)
As a Locum operating as a ‘sole trader’, working directly with NHS Practices (not company intermediary, not agency work, and not private work, but as a direct NHS GP Locum) you should have access to the NHS Pension scheme.
But, as a Locum, you administer the contributions yourself.
You will invoice the practice for employer contributions along with your session fee, and you will submit these employer contributions along with your employee contributions to the PCSE. You will also need to complete Locum A and B forms (this can be via PCSE online, with electronic signatures) or by completing ‘traditional’ A and B forms (either manually or via your Locum software and submitting these to the PCSE using their online ‘contact us form’).
However, you generally have to submit the forms/contributions within 10 weeks of the session having been worked. So, keep these time limits in mind. If you miss the deadline, then typically (barring a few exceptions) your contributions will be rejected, and you’ll have failed to pension that income.
Also, if you have been employed as a salaried GP by a GP Practice, or have undertaken work pensioned via GP SOLO, you’ll need to compete a Type 2 pension form at the end of the year (including any pensioned Locum work on this).
A Type 2 form is like a tax return but for GP Pensions – without it your record won’t be updated, so it’s extremely important to complete.
If the only practitioner work that you’ve done in the year is Locum work, then you won’t need to complete this form. But be aware of it, in case your circumstances change!
7. Separate Bank account
Not essential but recommended.
It can be clearer to receive all of your self-employed income into an account which is separate to your normal day to day income / spending money. And to pay expenses relating to your Locum work from this.
If you or your accountant need to look over your transactions it is simpler and clearer to do this. You don’t have to filter out personal transactions (or information that you don’t want anyone else to see). It’s easy to find the information if HMRC ever want to see it.
It doesn’t have to be a business account – it could just be a sperate current account.
8. Save for your tax
As an employee – tax, national insurance, student loan etc. is held back from your pay, and then paid over to HMRC on your behalf each month.
Being self-employed, you have to make the payment yourself, but unless you set up a standing order with HMRC, this isn’t on a monthly basis, it’s not automatic, and you need to actually think about it.
Ordinarily, you’ll be due to make your first tax payment at the end of the January after the tax year has finished. What does that mean? The UK Tax system runs from April-April. So, for what we refer to as the 2024-25 (which will be the year ended 5 April 2025) you will need to pay your tax by 31 January 2026.
That sounds like a long time and a big gap, and you’ll feel like you’ve got lots of money in your account up to that point (assuming you haven’t spent it all). But ultimately, you can’t keep it all!
What usually trips people up more than anything is what’s referred to as the payment on account system.
Generally, if the tax that you owe at the end of the year is more than £1,000, HMRC will want you to pay towards the next liability in advance. So, they will ask for advanced payments ‘on account’ – these are calculated as 50% of the last liability due.
In a nutshell, that first January after your first self-employed tax year, you’ll owe 150% of the tax due, with another 50% due in the July. It does settle down once you’re in the system, but it feels like a lot to start with (especially if you haven’t been saving as you go).
So you really should be encouraged to save a proportion of your income for tax on a rolling basis (every single month / time you get paid).
And remember, you’re not just paying tax at the end of the year, you’re paying national insurance, student loan where relevant, child benefit charge if it applies to you etc. So, the amounts due, especially when you’re getting started, can be a lot more than you think.
9. Remember you are now a business (not just a doctor)
You are treating patients, you are a doctor. But if you are not salaried, you are now taking on the roles that other people within a practice / trust / organisation would normally do.
You are now the person who books your sessions, you are responsible for invoicing practices and you are responsible for your pension contributions being paid to the correct people.
In short, you need to remember that although your primary purpose may be to treat patients, you are now a business and you need to either create time to fulfil that function, or get help with this (think accountant, virtual PA etc.).
This means that you need to promptly invoice, or you won’t get paid. You need to be hot on pension deadlines, otherwise your contributions will get rejected.
10. Invest in your financial education
You’ve invested in your medical education for years and years…now it’s time to invest in your financial education.
I often speak with GPs who relay –
“I don’t know anything about finances”. OR “I was taught how to be a doctor but no one taught me about tax!”.
Your finances are an investment, just like anything else. What you put in; you get back out.
Does that mean you have to spend money? Not necessarily! You could do lots of reading or listen to podcasts etc. (although that will ‘cost’ you your time).
But I can’t stress how important it is to understand what’s happening with your money, and to not be terrified of your finances.
There are things that you can do which are correct, and within the letter of the tax law, but they may not be the best option for you. It’s so important to have an understanding of what’s happening.
You don’t necessarily need an accountant if your tax affairs are simple, or if you are confident that you are handling them correctly.
But if you do need help, think of getting an accountant and seek out a specialist. If you decide to do this, view this as an investment in your finances – getting things right, reducing risk of enquiry, minimising tax (legally!), taking the guess-work out of it for you, maximising your time and reducing tax return-related stress, and for the things you can learn and the knowledge you can gain from a professional in the industry!
These points provide a guide to managing both the financial and business aspects of being a locum doctor. If you would like to receive any further help or advice, please contact one our specialist medical accountants on 01424 730345 or email doctors@honeybarrett.co.uk.
Take a look at the video created in association with NASGP
