As a locum pharmacist or optometrist, you're stepping into a world of incredible flexibility, greater choice of working hours and locations, and the potential for better pay. However, this exciting autonomy also brings the responsibility of managing your finances. This guide, inspired by the expertise of Peak Chartered Accountants, will help you navigate the financial landscape of locum work, ensuring your financial well-being from the outset.
Structuring Your Business: Sole Trader vs. Limited Company
One of the first crucial decisions you'll face is how to structure your business. The two most common options for locums are becoming a Sole Trader (self-employed) or setting up a Limited Company.
Sole Trader: This is the most common structure, with almost 80% of locums opting for it. It's simple to set up, involves less administration, and allows you to keep all your profits. If you choose this route, you'll need to register for self-assessment with HMRC.
Limited Company: This option can be potentially more tax-efficient and offers greater personal protection, though it involves more administration. If you set up a Limited Company, you'll register with Companies House, which will then register your company with HMRC.
Essential Financial Practices for Locums
Regardless of your chosen business structure, certain financial practices are vital for your success and peace of mind.
Open a Business Bank Account: Keeping your business and personal finances separate is absolutely essential. Many banks offer free business accounts, with popular choices including Monzo, Starling, and Mettle.
Keep Good Records: Staying on top of your income and expenses will save you time and reduce stress when it comes to tax season. You'll need to meticulously keep invoices for your locum work, receipts for business expenses, and maintain bank statements or accounting records. Digital tools like LAL Pro can be invaluable for efficient record-keeping.
Understand Your Taxes: As a self-employed locum, you'll be responsible for filing your self-assessment tax return and paying Income Tax and National Insurance contributions on your profits. The tax year runs from April 6th to April 5th, and your tax is calculated on your income minus any allowable business expenses during that period. For the current tax year, your tax return and any payment due must be submitted by January 31st of the following year. Keep in mind that from April 6, 2026, sole traders with income over £50k will need to keep digital records and submit quarterly reports to HMRC instead of an annual self-assessment tax return.
Maximising Your Allowable Expenses
Understanding and claiming your allowable expenses is key to reducing your taxable income. These are the costs of running your business that HMRC permits you to deduct from your income.
Professional Subscriptions (Like LAL Pro): Membership fees to professional bodies and regulators are allowable expenses, as are payments for training and CPD courses.
Phone and Internet: If you use your mobile phone and home internet for business, you can claim a reasonable proportion of these costs as allowable expenses.
Insurance: Your professional indemnity insurance is a mandatory and always allowable expense.
Travel Expenses: Costs associated with business travel, such as train, bus, taxi, and parking, are allowable if the primary reason for your journey is business. If you use your car for locum work, you have two options for calculating allowable expenses:
- Actual Expenses: Record all car running costs and split them between business and personal use
- Mileage Allowance: Claim a simplified allowable expense rate of 45p per business mile, which covers all your motor vehicle costs. Whichever option you choose, keeping a record of your business mileage is essential.
- Pension Contributions: While not a business expense that reduces your taxable income, you may be eligible for tax relief on your pension contributions.
Partnering for Success
Managing your finances as a locum can seem daunting, but you don't have to do it alone. Peak Chartered Accountants has over 20 years of experience helping locums across the UK with their taxes. They can offer you the peace of mind that your finances are well-organised and fully compliant with HMRC.
Download Free Locum Tax Guides,here