Dr Surina Chibber advises on how to manage your finances as a GP locum, from taking control of tax to claiming expenses.
With inflation at an all-time high and the cost-of-living spiralling, there has never been a better time to start becoming empowered to optimise your finances when working as a self-employed GP.
Here are eight financial tips that every GP locum should know.
1. Change your mindset
Becoming an independent locum GP requires a real shift in thinking. You need to transition from employee status - where all your tax, pension and national insurance contributions are automatically deducted with each payslip - to running your own small business.
Getting organised and becoming financially educated will help you to optimise your income while avoiding needless penalties for missing deadlines or making errors.
Key dates to have in your diary include:
• Any balance of tax due for the tax year is payable to HMRC on 31 January.
• Tax returns must be submitted to HMRC by 31 January after the tax year end; otherwise, automatic penalties are applied, and these can be substantial.
• Register for self-assessment by 5 October following the end of the tax year in which you start in self-employment. For the 2023/24 tax year, this will be 5 October 2024.
• HMRC will notify you in writing of your Unique Taxpayer Reference (UTR). This is a 10-digit number and will remain with you for the rest of your life, so keep it somewhere safe!
2. Keep the record straight
Keep on top of all your records and keep hold of them for seven years (that is, all expenses with invoices and receipts). You should also keep copies of your pension A and B forms, as you will claim tax relief on your pension contributions. This need not be a laborious task, though.
Bespoke locum software platforms, such as My Locum Manager, can create your invoices and pension forms for you. They can even do the calculations and store everything on their cloud-based system, making it easy for you to stay on top of your essential admin.
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.
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.
As soon as you start as a locum, you need to register with HMRC for self-employment and class 2 national insurance (you can do this here). You will need to complete a tax return each year; 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. The usual recommendation is to put at least one third of your income away for tax, but good accountants will offer you computation reports to advise how much to set aside. You will pay tax twice a year - the deadlines are 31 January and 31 July.
Note that in the first year of starting, you’re not required to make any payments (unless you previously submitted tax returns). So, if you haven’t been saving, there can be a scarily large figure waiting for you at the end of this period.
If you’re worried about whether you’re going to get it right, consider hiring an accountant. Look for someone who is not only professionally qualified but also experienced in dealing with doctors and the complexities of the NHS pension scheme. Accountant fees are tax deductible.
However, 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.
4. Fill your pension pot
Did you know that you receive tax relief when you pension your income? This is just one of the many benefits of the NHS pension. But to contribute to your pension, it is essential to stay on top of the administration of completing and submitting your pension forms with your pension payments to PCSE. You must submit these forms within 10 weeks of completing the session. You can’t pension income paid from an agency or for any private work, though.
5. Remember there are two pension forms
You will need to submit a form A and B for your pension contributions. 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 of the 10-week deadline, though; it is best to complete these forms as soon as you can.
6. Ask, is the price right?
The BMA no longer publishes a locum rate guide, so ask other locums what they charge. Rates often vary depending on whether the session is in person, remote, on call or pre-booked patient list.
Then, 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, but some practices may not pay this on top of your rate, so expect to incorporate it into your fees.
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
To maximise your income, it is essential that you claim for allowable expenses. Being meticulous about tracking your expenses can save you hundreds or even thousands of pounds annually.
Below is a check list of eligible expenses that you can claim as a GP locum:
• Motor expenses
• Mobile phone
• Professional subscriptions, such as indemnity
• Use of home office
• Internet and laptop expenses
• Courses and conferences
• Medical equipment and books
You can get a more detailed breakdown on the HMRC’s website.
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 check the HMRC rules of eligible expenses or speak to your accountant.
8. It’s all in the planning
Start as you mean to go on: keep a record of your income and expenses; keep on top of admin; enlist the help of an accountant; and consider consulting financial advisors so you can plan for the future.
As a self-employed GP, your ability to work is directly related to your income, so getting professional advice on sickness and income protection is an important consideration, too.
Dr Surina Chibber is a locum GP and co-founder of MyLocumManager.com, the complete online financial software for working as a GP locum.