Should I set up as a Limited Company to work as a GP Locum?

In this article, learn about registering as a limited company and the advantages whilst working as a GP locum.

What is a limited company?

From the governmental guidelines on limited companies:

A limited company is an organisation that you can set up to run your business. (In this case, operate as a GP locum.

It’s responsible in its own right for everything it does and its finances are separate to your personal finances.

Any profit it makes is owned by the company, after it pays Corporation Tax. The company can then share its profits.

How do I set this up?

To set yourself up as a limited company, you’ll need to register with Companies House, opening a business account in the name of the company. All expenses are deducted from the total profits.

Every year, your company will have to put together statuary accounts, file an annual tax return and send a company tax return to HMRC. Additionally, if you have profits of more that £79,000 you must also be VAT registered.

You’ll be able to pay yourself a salary every year, which you won’t have to pay any tax or national insurance contributions on. You’ll be able to pay yourself up to £32,000 paying only 20% corporation tax though dividends, avoiding income tax. After this threshold, you’ll keep 75-80% of your daily locum rate.

You can set up your limited company yourself, but many people will use an accountant, which allows them to focus on their core business. You should be able to get a free consolation to find out more. Typically, an accountant will charge £600-700 to set up a limited company.

Advantages

By contracting with practices as a limited company, and paying yourself through dividends, you may be able to reduce your tax burden if your earnings are high enough. Instead of being paid directly by the practice, payments will go to your company and then you’ll receive payment as a director. As you won’t have to make the same tax payments or pay national insurance contributions, you’ll make huge savings.

Disadvantages

There are greater accounting requirements when operating as a company, and more risk of getting it wrong. Companies are subject to IR35 legislation, which is designed to prevent tax avoidance.

To avoid being challenged, it’s important that you have a compliant contract. If locum work is only a part of your income, they it may not be financially worthwhile and you may be better off with PAYE or self- employment.

One of the major aspects/disadvantages of running as a Limited company is that you cannot claim an NHS pension, so you are banking on your tax savings outweighing any loss of NHS pensions. It is therefore worth thinking about a private pension in this circumstance.

Top tips from Dr Susan Brennan, our Head of Clinical Governance.

1. It’s worth shopping around for your accountant, as price varies greatly depending on location!
2. Keep organised. Make sure you keep a record of all outgoings, receipts, milage, all of which you can claim tax back on. You don’t want to be struggling through carrier bags full of receipts at the end of the year- not fun. Make a simple spreadsheet.
3. Don’t be late, you and your account need to submit your returns on time, or face a fine.

Gov.uk guide to Limited Companies