If you are a locum doctor or nurse you may be better off working through your own Limited company rather than working on your agency’s books or joining an umbrella company.
At Clearways Accountants we can tell you that working though your own Limited company is the most tax efficient way of taking on locum work. Your company’s profits will be taxed at 20% up to £300,000 per annum and depending on how much you take out of the company you may not pay any further tax.
There are a number of benefits in being a locum:
- There is constant demand in the NHS so you will never be short of work
- Freedom to work where you want
- Freedom to work when you want
- Long or short-term opportunities – to suit you
- Opportunities to expand your skills and
- Gererally higher rates of pay
If you work as a locum through your own Limited company you will be able to deduct travel costs from your day rate (although see our article on the 24 month rule if you take a long contract).
You can also save on national insurance. When you are enrolled on your ageny’s books or if you work through an umbrella company you will pay both employer’s and employee’s national insurance out of your day rate (the employee rate is 12% for amounts between £149 – 770 per week and employer rate is 13.8% on all income over £148 per week). If you contract through your own company you could save the following amounts of national insurance per day:
At a day rate of £200 approximately £13 per day (£3,055 for a 5 day week, 47 weeks a year)
At a day rate of £350 approximately £50 per day (£11,750 for a 5 day week, 47 weeks a year)
At a day rate of £600 approximately £115 per day (£27,000 for a 5 day week, 47 weeks a year)
There are downsides to working through your own company:
- You will have to be a director of your own company with more responsibilities than just being an employee;
- You will no longer benefit from your employer’s contributions to your pension fund;
- You will need to be organised to invoice your agency, collect the fees and check your company bank account;
- You will need to keep back some money to pay your company tax bill; and
- You will probably need to take out professional indemnity insurance.
Although the administration can seem daunting, most professionals find that the monthly record keeping can be completed in less than an hour a month.
Locum doctors, nurses and VAT
Most health services provided directly to patients are not subject to VAT (being exempt services) however if you are providing management services you will need to charge VAT once your turnover reaches the registration threshold. There is more information on VAT and health here
If you are working in a managerial position you may choose to register for VAT and join the flat rate scheme – you may find there are even more savings to be made.
If you would like help in setting up as a locum (contracting) doctor or nurse though your own Limited company then please contact Clearways Accountants.