Managing your locum finances needn’t be as overwhelming as one often expects. The biggest difference when starting locum work is that instead of deductions being automatically taken from your monthly salary, you must manage your invoices, tax and pension contributions yourself. Here are my 5 essential steps to managing your finances as a locum GP.
1.Sole Trader vs Limited Company
This is the key question for all locum GPs. If you are planning on maintaining your NHS pension then you would register as a sole trader with the HMRC.
If you no longer wish to contribute to your NHS pension, and if you are earning above a certain threshold you may consider operating as a limited company. It can be a more efficient way of reducing tax bills and national insurance contributions. Accountancy fees will be higher. I would recommend discussing your financial plans with an accountant to help you make the right decision.
2.Pension Contributions
As a sole trader, to pay into your NHS pension you must complete a pension form A and B. Form A is completed for each invoiced session. Form B summarises all pensionable pay received that month. It is completed monthly and sent to the pensions office with a cheque of your calculated contributions. You cannot pension income paid from an agency or for private work undertaken. There is a 10 week deadline for declaring NHS pensionable income so it is imperative you have a system in place to keep on top of this.
| Tier | Full-time pensionable pay/earnings used to determine contribution rate | Contribution rate (before tax relief) (gross) 1 April 2015 to 31 March 2019 |
|---|---|---|
|
1 |
Up to £15,431.99 |
5% |
|
2 |
£15,432.00 to £21,477.99 |
5.6% |
|
3 |
£21, 478.00 to £26,823.99 |
7.1% |
|
4 |
£26,824.00 to £47,845.99 |
9.3% |
|
5 |
£47,846.00 to £70,630.99 |
12.5% |
|
6 |
£70,631.00 to £111,376.99 |
13.5% |
|
7 |
£111,377.00 and over |
14.5% |
3.Tax
The tax year runs from 6th April to 5th April. You are required to file a tax return each year. The deadline for submitting your tax return online is 31st of January of the following year. Two tax payments are due each year by the 31st of January and 31st of July. It is imperative you keep money aside for your tax bill.
In order to complete a tax return accurately you will need to start keeping proper records of both your income and your expenses.
These records must be kept for a minimum of five years. If you undergo a tax investigation at any point then you would be required to submit these records to the HMRC.
4. Expenses and mileage
To be as tax efficient as possible with your hard earned income ensure you have a good accountant and that you record all tax deductible expenses. Expenses incurred for the business can be claimed as long as they meet the HMRC’s criteria of being ’wholly and exclusively’ for the business. Typical expenses that can be claimed include indemnity payments, professional subscriptions, exams, courses, medical equipment and accountant fees. Tax relief is also available on pension payments, phone, internet and office consumables. Ensure that you should also record any expenses for business use of your car. This includes fuel costs, insurance, breakdown cover and MOT. A more comprehensive list of expenses can be found here.
5. Accounting Software
Using a software system like www.MyLocumManager.com is an effective way for busy locums to manage their finances. It can be a time-saving and efficient way to do all your record keeping, log receipts and expenses. Added benefits include that your business mileage is automatically calculated and time consuming pension calculations are automatically done for you.
Dr Surina Chibber is a sessional GP in West London, co-founder of www.MyLocumManager.com, involved with Hounslow CCG and a healthcare tech developer. You can follow her on Twitter @dr_surina
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