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 key questions many new locum GPs have about their finances.
Should I be a sole trader or 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. Whether you are a sole trader or limited company you must log all your income and expenses. A bespoke software like MyLocumManager.com can make this straight forward.
How do I get my NHS pension?
As a sole trader, to pay into your NHS pension you must complete a pension form A and B. You cannot claim an NHS pension as a limited company. The first step is to calculate how much you will be contributing to your pension. This contribution is calculated according to your prospected earnings. Please see table 1. In England, the GP practice (employer) will contribute 14.38% to your pension. This amount must be added to your invoice.
Form A is completed for each invoiced session. Form B is completed every month and summarises all the pensionable pay received that month. Your pension form B also shows you the amount you need to pay towards your pension contribution. You should complete Form B every month and send it with all your Forms A’s for that month and a cheque of your calculated contributions, to your pensions office. 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. Manually completing the forms is time consuming task. Bespoke software like MyLocumManager can do this for you automatically.
Dr Surina Chibber, @dr_surina