Engaging in the locum market can be a lucrative career option, with between 50% and 80% of UK hospital doctors being locum staff. High demand and a shortage of doctors across the country means you won’t struggle to find suitable placements, but how do you get paid for your time? Working freelance means there are a couple of options open to you, but undoubtedly the most popular choice for locum doctors is using their own limited company.
Having your own limited company where you are the Director means that you can expect to take home approximately 70%-80% of your earnings if you fully satisfy IR35 rules; if you do not meet this criteria you will be liable and potentially so could be your agency. You could even be paid £5 more per hour than a PAYE locum worker. Setting up your own limited company will mean taking on additional administrative duties, and you will also need the help of an accountant or service provider to keep your finances ship shape.
What is a limited company?
Government guidelines define a limited company as:
“A limited company is an organisation that you can set up to run your business. 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.”
Why set up a limited company?
The main advantage is the take home pay depending on IR35 and subject to control – with only yourself to pay you can take home the majority of your earnings which is obviously much better for you. A limited company is also a separate, legal entity, so if you have other bank accounts or incomes, these can remain completely separate which reduces confusion and risk.
A limited company also means that you have complete control of your finances with no third party involved, although you will need the commitment to keep on top of your paperwork that will need to be sent regularly to your accountant. A positive here is that many accountants actually charge less than umbrella companies; so again, having your own limited company can be more financially rewarding.
Top three tips:
Susie Brennan, Network Locum Blog’s Head of Clinical Governance gives her top three tips on having a limited company:
1) It’s worth shopping around for your accountant or third-party service provider, as price varies greatly depending on location.
2) Keep organised. Make sure you keep a record of all outgoings, receipts, mileage, 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.
Feel free to contact us if you would like to talk through your options for being paid as a locum doctor.
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Financial information provided by RACS Group, one of our preferred umbrella suppliers.