How to reduce your tax bill as a locum doctor

Locum work offers flexibility and often higher earning potential, but it can also bring complex tax obligations. Many locum doctors end up paying more tax than necessary simply because they’re unaware of the planning opportunities available to them.

In this guide, we outline practical, HMRC-compliant strategies to help you reduce your tax bill and keep more of your income.

Claim all allowable expenses

One of the most effective ways to reduce your taxable income is by claiming legitimate business expenses.

As a locum doctor, common allowable expenses include:

• Professional indemnity insurance
• GMC fees and subscriptions (e.g. BMA, RCGP)
• Accountancy fees
• Medical equipment and textbooks
• Travel to temporary workplaces
• Mobile phone and internet (business proportion)
• Mileage (or actual vehicle costs, depending on method)

Many doctors underclaim. Even small recurring costs add up over a year and can significantly reduce your tax bill.

Make pension contributions

Making pension contributions is one of the most tax-efficient strategies available.

Options include:

• NHS Pension Scheme (if applicable)
• Private pension (SIPP)

Benefits:

• Tax relief at your highest marginal rate (20%, 40%, or 45%)
• Reduces your taxable income
• Helps mitigate child benefit taper and personal allowance taper

Important: If you are considering making additional pension contributions, it is essential to review your overall position first. NHS pension growth, combined with any private contributions, can use up your Annual Allowance. Exceeding this can trigger an Annual Allowance tax charge. 

Consider your business structure carefully

Locums typically operate as:

• Sole traders
• Limited companies

Each has different tax implications.

Sole trader

• Simpler and often more tax-efficient at lower income levels
• Full access to personal allowance

Limited company

• Potential tax savings through dividends
• More planning flexibility
• May be beneficial at higher income levels or with retained profits
• You can not pension your locum work through a limited company

Important: Due to IR35 and NHS engagement structures, limited companies are not always suitable. This needs careful review.

Keep an eye on the £100k–£125k trap

Once your income exceeds £100,000, your personal allowance is gradually withdrawn.

This creates an effective 60% tax rate.

Ways to mitigate:

• Pension contributions
• Charitable donations (Gift Aid)
• Timing of income where possible

This is one of the biggest hidden tax traps for locum doctors.

Reducing your tax bill isn’t about aggressive schemes, it’s about understanding the rules and applying them effectively.

With the right planning, many locum doctors can significantly reduce their tax liability while staying fully compliant with HMRC.

Need help?

Get in touch with your usual Larking Gowen contact or send an enquiry to our team:

• 0330 024 0888
• Submit an enquiry

Jamie Butcher | Manager in our medical accounting team | Colchester, Essex