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Your eight-step guide to finances as a locum

Sessional GP Dr Surina Chibber shares her eight-step finance guide for self-employed GPs.

Dr Surina Chibber 3x2

1. Change your mind-set

Branching out on your own as an independent GP requires a real shift in thinking. You need to make the change from employee status (or newly qualified status) to running your own small business. And, of course this gear change is on top of your day job as a GP.

Getting organised will help you avoid needless penalties for missing deadlines or making errors. Here’s a brief summary of the most important first things to consider when starting your new locum life:

2. Keep the record straight

Keep on top of all your records and keep hold of them for seven years. This means all expenses with invoices and receipts. You should also keep copies of your A and B forms as you will claim tax relief on your pension contributions.

HMRC may want to look into your accounts, so be prepared to justify and provide evidence for the rationale behind your costs, especially when there are both business and personal costs involved.

You may find it easier to just use one credit card for business expenses so that you don’t have to spend time ‘weeding out’ personal expenditure.

You may also want to consider using a spreadsheet or a GP locum software system to streamline your record keeping. Look out for platforms where you can record any income source such as income from rental property or income from teaching. This way you’ll obtain a more holistic approach to your finances.

3. Take control of your tax

If you’ve been employed then make sure you get your P45 from your employer. You don’t need to send it anywhere unless you obtain other employment, but you will need it for your tax return – so keep it safe.

Register with HMRC for self-employment and Class 2 National Insurance as soon as you start as a locum. You can do this here.

You need to complete a tax return each year and the tax year always runs from 6 April to 5 April. The deadline for submission is always 31 January following the tax year end. Don’t be late – the fine is £100 plus additional daily charges.

Practices will pay you gross of tax and it’s your responsibility to ‘save’ a proportion of your fees to pay your tax bill when it arrives. The usual recommendation is to put at least one third of your income away for tax.

You pay tax twice a year. The deadlines are 31 January and 31 July, although you actually pay three instalments of tax for a tax year.

However, in the first year of starting you’re not required to make any payments (unless you previously submitted tax returns). There can be a scarily large figure waiting for you at the end of this period if you haven’t been saving.

If you’re worried about whether you are going to get it right, meet deadlines, comply with all your obligations as a self-employed person, then you need a professional adviser. If you want to do it yourself, be prepared to spend a lot of time researching to make sure that you don’t accidentally get something wrong. Penalties for ‘careless’ returns are expensive. Consider if the time used might be better spent practicing medicine and using the money earned to pay a (tax deductible) adviser. You should look for someone who is not only professionally qualified but also experienced in dealing with doctors and the complexities of the NHS pension scheme. Ask for recommendations from colleagues and experienced GPs. Some software platforms offer free financial advice and help with finding a good accountant.

4. Fill your pension pot

You can use your locum income to pay into the NHS pension. The form was revised in April 2018 so make sure that you use the new one for work undertaken since that date, and the old one for any work prior to 1 April 2018. Remember you can’t pension income paid from an agency or for any private work, however.

5. Remember there are two pension forms

You will need to submit a Form A and B for your pension contributions. So why the two forms? Well, Form A is to be completed with each invoice and sent to the practice. Form B should be completed at the end of the month as a summary of all pensionable pay received that month. It is then sent to the pension office with a cheque of your calculated contributions. Beware the 10-week deadline. Complete these forms as soon as you possibly can.

For your reference, the tier rates are as follows:

Tier

Full-time pensionable pay/earnings used to determine contribution rate

Contribution rate (before tax relief) 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%

Pension administration can be a laborious task and very time consuming. You may like to consider registering with a locum software platform to use their automated system. Most run a free three-month trial so you can try it out first.

6. Ask, is the price right?

The BMA no longer publishes a locum rate guide so it’s probably best to ask other locums in your area what they usually charge. There are also some groups on facebook and other social media whose sole aim is to connect locums and sessional GPs so these may also be a good place to start.

Nail down your terms and conditions so that practices are clear about what is and isn’t included in your fees, for example are home visits included?

You’ll also need to clarify the cost of the employer’s pension contribution, although some practices may not pay this in addition to your rate, so expect to incorporate it into your fees.

Ensure that you include any increased costs of indemnity as the GP contract deal for 2017/18 and 2018/19 only covers increased costs for salaried GPs and partners.

You should send a monthly invoice to your practice detailing your fees, number of hours worked and the total amount you are owed. Payment terms are usually 30 days.

7. Claim your expenses

Below is a quick check list of eligible expenses that you can claim as a GP locum. Any valid expenses will obviously go some way to reducing your overall tax bill.

  • Motor expenses
  • Mobile phone
  • Professional subscriptions such as indemnity
  • Use of home office
  • Home internet, laptop expenses
  • Courses and conferences
  • Medical equipment and books

Expenses must be wholly business related. For example, motor expenses will include both business and personal use and this will have to be allowed for in both expense claims and tax calculations. Keep a log of mileage for business use so you can calculate how much of your car costs can be claimed against the business. You can also claim capital allowances, hire purchase and loan interest so double check the HMRC rules of eligible expenses or speak to your accountant.

8. Note it’s all in the planning

Start as you mean to go on. Keep a record of your income and expenses religiously throughout the year to make your tax returns less arduous. Keep on top of admin; pension, invoices, receipts, spreadsheets and your life will be far less stressful that way. Enlist the help of a good accountant who will help you with tax and National Insurance payments. Get savvy with your spreadsheets or look into a locum software toolkit that can take some of that admin strain.

Dr Surina Chibber is a locum GP and co-founder of MyLocumManager.com

 

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Readers' comments (2)

  • From what I understand you don’t need to clarify your employers contributions. If you state a fee and aren’t working through a company the advice I was given is that practices should expect to pay the necessary pension contribution and indeed they get funding for this. Can anyone clarify if this is still the case?

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  • Northwestdoc - it's all in your T&C; mine explicitly state that the employer contribution isn't included.

    There are some useful things to think about if you are new to locum work in this article, but some of what is presented as firm advice is actually opinion e.g. "Payment terms are usually 30 days." Says who? Mine aren't!

    It is also highly questionable to suggest discussing locum fees on social media, as this might be considered to be forming a cartel. I'm surprised Pulse has published this advice.

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