Navigating the working world as a locum can be challenging, and setting up a limited company may help locum doctors with the process. There are many ways in which locums can best offer and provide many of their highly skilled services. This could include working from a locum agency, carrying out locum work under an umbrella company, operating as a sole trader, working through direct employment, or working via a limited company. This article is going to discuss the basics of working as a locum via a limited company.
By nature, a limited company is a private company where the owner(s), in this case, the locum, are personally responsible for any of the company’s debts or investments. As a limited company, a locum’s personal income and assets are separate from that of the company’s income and assets.
For many locums, running or operating a limited company normally provides a more tax-efficient way of operating. It also gives the locums the chance to become the limited company’s director. It should be worth noting that unless you are particularly tax savvy, you may need the assistance of an accountant in order to benefit from the many tax-saving benefits available as a limited company.
If you do decide to set up a limited company as a locum, you can secure a number of tax efficiencies by paying yourself the perfect combinations of salary and dividends in order to reduce the amount of tax that you will have to pay.
As a locum operating as a limited company, you can also claim tax back on many business expenses. This could include things like fuel, travel expenses like car hire, vehicles, and accommodation costs. These are just a few of the many expenses you can claim back as a locum operating as a limited company to help further reduce the tax you will have to pay.
You can also contribute to what is known as a private pension scheme as a limited company, which is considered to be quite tax efficient.
Ultimately, it is up to the locum how they wish to operate and which way they best like offering their services. However, if locums wish to take advantage of certain tax loopholes, then it is worth looking into setting up a limited company.
Whilst setting up a Ltd may sound like a great way of becoming more tax efficient while working, it is important to know that you must operate in a particular way in order for your contract to not fall into the scope of IR35.
If your said contract happens to be inside IR35, then this means that you are treated as though you were an employee of your particular client, and your income will be subject to national insurance contributions and employment tax. It is therefore recommended to be aware of IR35 and what triggers it. You can then carry out locum work as an ltd accordingly.
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