The decision to become a locum GP is often based on a desire to have more control over your workload and schedule, and this is definitely achievable. However, it also means taking on the responsibility for everything, starting with the choice between setting up as a sole trader or limited company.
Sole trader vs limited company – the main differences
A sole trader is both the owner and the manager of a business, and with some discipline, you barely need an accountant, whereas a limited company employs you, the director, on a salary and generally needs an accountant on the books to manage the more complicated legal and financial aspects. There are advantages and disadvantages to both options, so it really depends which scenario appeals most to you.
Key points of sole trader status
Currently, this status entitles you to stay with the NHS pension scheme, and pay national insurance contributions and tax based on the salary you make, following the deduction of legitimate expenses and allowances. There’s plenty of scope for this, with free advice on many websites. This is a less complicated, low-key route to self-employment, but any debts incurred will remain your personal responsibility.
Key points of limited company director status
Generally, the business pays you a salary up to the PAYE and NI contribution threshold and the rest in dividends; the profit left after corporation tax is deducted. Dividends don’t attract NI contributions and are taxed in stages, so you could well be better off being paid this way. Just make sure you own all or most of the shares.
Regular GP locum jobs at one practice may be welcome, but they risk triggering IR35 legislation, which means PAYE and national insurance contributions being deducted from your fee by the practice. Avoid this by using a GP locum agency such as http://www.thegplocumagency.co.uk/, who are aware of such money traps and can avoid them. Regular work in varied locations is much safer.
Unfortunately, as a limited company director, you will be ineligible for the NHS pension scheme, and you’ll need to consider how to work the costs of a replacement into your locum fee. On the plus side, you are protected personally against liability for any debts the business attracts.