Could a limited company be the right choice for locum doctors?

by Crunch Accounting : Mel Dixon

Many locum doctors in the UK work via NHS and locum agencies which handle their pay much like a direct employer would. However, there are other ways that locums or freelance GPs can go about finding work and getting paid for their services.

The locum doctor can provide work under a variety of different guises, including limited company, sole trader or umbrella company. And of course, the aforementioned more direct route…

NHS and locum agencies

By providing services through an NHS or locum agency, health workers are taxed at source under normal PAYE rules. This is fine for many as they won’t have to do any accounting or tax preparation. On the downside, it’s not the most tax friendly way of working as a freelance doctor and you are restricted in the expenses you can claim.

For healthcare professionals immigrating to the UK for the first time, it may be the preferred option as some agencies offer profession specific help and guidance.

Limited company

Running a limited company offers the biggest tax saving option and gives you the opportunity to be the director of your own company. For most people a limited set-up requires the services of an accountant unless you’re particularly sharp on tax filing procedures and day-to-day administration.

The tax saving benefits stem from the ability to pay yourself the right combination of dividends and salary, thereby avoiding National Insurance Contributions.

In the right hands, a limited company can be a simple way of doing business. Unfortunately, some accountants will leave you adrift in a sea of receipts, invoices, and documentation which you then have to gather up in an orderly fashion before sending it all over for them to sort out. However, if you have an accountancy service which keeps all your records safe and secure online whilst offering expert help and guidance, limited company life becomes incredibly simpler.

Limited company accounts are a specialty at Crunch

Sole trader

The major advantage of being a sole trader is that it’s the simplest way of running your own company. You also get to claim expenses (like a limited company).

The major disadvantage is that it’s not as tax efficient as a limited company – depending on how much you earn you could keeping a lot more of your pay with a limited company. As a sole trader you are liable for income tax and capital gains tax (which is a tax on selling or giving away assets such as property or vehicles).

Umbrella companies

Working freelance via an umbrella company is much like an agency set-up where the umbrella company sorts out your tax paying responsibilities, leaving you to simply hand in timesheets. They will naturally charge for the payroll service they provide, and it’s administered on a Pay As You Earn basis. So, it’s not tax efficient and yet still you have to pay for the privilege.

For umbrella companies promising high amounts of take home pay, be very wary. From April 6, a key offshore loophole is being closed which is used by most of these services – read more about such arrangements on this link.


There are a range of options for locum doctors in the UK, but without doubt the most rewarding is a limited company formation. At Crunch we provide qualified expert accountancy advice alongside our online software which enables you to automatically draw up invoices, easily record expenses and have a real-time snapshot of your incomings and outgoings – among many other capabilities. By keeping all your accounting needs in one place, life as a limited company director is surprisingly easy.

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