Locum Doctor 2026 Tax Checklist

Navigating Tax as a Locum Doctor in 2026: Your Essential Survival Checklist

There’s a moment every spring when the panic sets in—a flurry of receipts on your kitchen table, multiple payslips from different trusts, and a gnawing worry about missing an HMRC deadline. For the UK’s locum doctors, tax season is more than an administrative headache; it’s a test of financial resilience and professional independence. After years spent supporting NHS wards and private clinics, you deserve a system that supports you back. This is your narrative-driven, data-backed, and practical 2026 Tax Survival Checklist—built for real people, not spreadsheets.

Why Locum Tax Is Different—and Why It Matters

Locums are the backbone of the NHS, filling gaps and keeping services running. But with flexibility comes complexity:

• Multiple income streams: NHS trust PAYE, self-employed agency locum, limited company dividends—all in one year.

• Risk of missed reliefs: Without robust tracking, thousands can be lost in unclaimed expenses and underutilised pension allowances.

• Ever-tightening deadlines: Miss the 31 January filing, and HMRC’s £100 penalty lands—no excuses.

• Pension pitfalls: The wrong contract structure can lock you out of NHS pension benefits, with long-term consequences.

“Tax mistakes as a locum don’t just cost money—they cost peace of mind, time, and sometimes even your ability to keep working.”

Let’s break down the materials, steps, and real-life examples to ensure you’re never caught off guard.

What You Need Before You Begin

Materials Checklist:

• National Insurance number

• HMRC Personal Tax Account login

• Details of all income streams (PAYE, agency, limited company, private practice)

• Bookkeeping software (Xero is recommended)

• Receipts and records for all professional expenses

• Pension scheme information (NHS or private)

• Previous year’s tax return (if applicable)

• Reliable accountant (specialist in healthcare/locums)

Step-by-Step: The 2026 Tax Survival Checklist

Step 1: Register and Clarify Your Tax Status

• Are you self-employed, a limited company director, or paid PAYE via an agency? Confirm with HMRC.

• Register for Self Assessment (or corporation tax) by 5 October after starting locum work.

• Create or update your Personal Tax Account on the GOV UK website.

Step 2: Review and Choose Your Business Structure

• Compare sole trader and limited company status for tax efficiency and administrative burden.

• Consider IR35 risk, especially if working through agencies or NHS trusts.

• Align your structure with your earnings and long-term professional goals.

Step 3: Track Income, Expenses, and Allowable Reliefs

• Use Xero or similar software to capture every payment and outlay.

• Record earnings from contracts, agencies, and private patients.

• Track allowable expenses: indemnity insurance, training, travel (where allowed), equipment.

• Monitor pensionable earnings if in the NHS scheme.

Step 4: Monitor Pension and Long-term Planning

• Assess how each income stream affects pension eligibility (especially for the NHS Pension Scheme).

• Plan pension contributions and watch for annual allowance issues.

• Consult your accountant to balance salary, dividends, and pension for optimal outcomes.

Step 5: Estimate Your Tax and NI Liability

• Forecast profit/dividends, calculate tax bands, and identify NI class (2/4 or 1).

• Set aside 25–30% of each payment into a dedicated reserve for tax and NI—locum income fluctuates!

• Use Xero dashboards for real-time updates.

Step 6: Meet All Deadlines

• File Self Assessment online by 31 January following the tax year.

• Make payments on account (31 January, 31 July) if required.

• File corporation tax, VAT, and Companies House accounts if a limited company.

• Missing deadlines triggers fixed penalties and interest.

Step 7: Annual Review and Restructure

• At year-end, review: Is your structure still right? Have your contracts or income changed?

• Adjust expense categories and bookkeeping practices.

• Schedule a review with your accountant to optimise your setup for the next year.

Real-World Examples: Stories from the Front Line

Dr. A: Sole Trader Locum

• Earns £100,000 via self-employed locum work

• Tracks income/expenses in Xero, claims £2,500 indemnity insurance, £3,000 CPD, and travel

• Files on time, avoids penalties, maximises deductions

Dr. B: Limited Company Director

• Runs “B Locums Ltd.” (income £180,000)

• Takes £12,570 as salary, the rest as dividends

• Monitors IR35 status; stays outside for public sector contracts

• Uses Xero to manage records and invoices—saves thousands compared to salaried equivalent

Dr. C: Hybrid Income

• NHS salaried job (£60,000) plus locum work (£40,000)

• Clarifies tax codes, ensures all income is reported

• Sets aside tax reserve, no surprises at year-end

Comparison Table:

Pitfalls to Dodge

• Not clarifying your employment status with HMRC

• Failing to check IR35 on agency or trust contracts

• Mixing business and personal finances

• Missing the 31 January or 5 October deadlines

• Underestimating income tax liabilities

• Neglecting to review your business structure yearly

• Assuming you can claim the same reliefs as NHS staff

Strategies for Success

• Engage a specialist healthcare accountant: They know the nuances of locum income, pensions, and IR35.

• Use cloud accounting (Xero): Real-time tracking streamlines compliance and planning.

• Set up a dedicated tax reserve: Automatically move 25–30% of each payment into it.

• Review your business structure annually: Income and contract mix change—so should your tax approach.

• Check IR35 and pension eligibility on every new contract.

• Keep digital copies of all contracts, receipts, and HMRC correspondence.

“In my first year as a locum, I missed the Self Assessment deadline by a week. The £100 penalty stung, but it was the lost sleep that hit harder. Now, Xero and a specialist accountant mean I sleep easy.”—Anonymous GP Locum

Frequently Asked Questions

Q: Do all locum doctors need to file Self Assessment? A: Yes, if you have any untaxed income (self-employed, company, or mixed).

Q: How much should I set aside for tax and NI? A: Typically 25–30% of gross locum income, but check with your accountant for your specific case.

Q: What if IR35 applies and I don’t realise? A: You’ll be taxed as an employee and may owe back tax and NI—always check contracts up front.

Q: Can I switch business structures mid-year? A: Yes, but timing is crucial—consult your accountant to manage compliance and avoid pension/NI gaps.

Q: Why use Xero or similar software? A: It simplifies tracking income, expenses, and tax; enables collaboration with your accountant and readies you for Making Tax Digital.

Q: What happens if I miss the 31 January deadline? A: Automatic £100 penalty, with further daily penalties after three months, and interest on unpaid tax.

Key Takeaways—Pin These to Your Fridge

• Register your status and obligations with HMRC early

• Choose the right structure for your current work

• Use Xero to capture everything, all year round

• Build a tax reserve—don’t let surprise bills ruin your year

• Monitor pension and IR35 status with every contract

• Never miss a deadline (31 January, 5 October, etc.)

• Review your approach annually with a specialist

• Get expert support

Next Steps: Your Checklist for Peace of Mind

• Download Xero or set up your chosen accounting software

• Schedule a structure review with a specialist healthcare accountant

• Create a tax reserve account and automate transfers

• Block out time each month for bookkeeping

• Bookmark the HMRC Self Assessment and Companies House deadlines

The best way to navigate the complexity of locum tax in 2026 is with preparation, technology, and the right advice. You care for patients—let us help care for your finances.