By Dr. Ndubuisi “Andy” Egwim – MBBS, former NHS Salaried GP, author of The Moneywise Doctor.
Moneywise Doctor provides financial education, not regulated financial advice.
The tax side of this move catches many GPs off guard, often a year after they’ve already made the switch. Switching from salaried GP to locum work changes how you’re taxed, moving you from PAYE deductions handled automatically by an employer to Self Assessment, where you calculate and pay your own tax, often in arrears. The work itself might look similar. The tax administration around it is completely different, and the gap between the two systems is where most first-time locums get caught out.
This guide walks through what actually changes, and what to set up before your first locum shift.
Why does this matter for GPs making this move?
As a salaried GP, tax comes out of your pay automatically before you see it. As a locum, especially one working as a sole trader, you receive gross pay and become responsible for setting aside and paying your own tax later. This shift catches people out not because the concept is complicated, but because the first tax bill often arrives well after the income has already been spent. Understanding the timing gap in advance is what separates a smooth transition from a stressful one.
Before you make the switch, it helps to see your full financial position. The Tax Hack X-Ray Scorecard can highlight things worth checking before your income structure changes.
What actually changes when you move from PAYE to locum work?
Several things shift at once:
- How tax is collected. PAYE deducts tax automatically each payday. Self Assessment requires you to calculate and pay tax yourself, usually annually, sometimes with payments on account partway through the following year.
- When you pay it. PAYE tax is paid as you earn. Self Assessment tax on locum income is typically paid well after you’ve earned and spent it, which is why many first-time locums are unprepared for the bill.
- What you can claim. Locum work, particularly through a limited company, opens up business expense claims that aren’t available to salaried employees in the same way.
Key rules to understand before switching
- You need to register with HMRC. Whether working as a sole trader or setting up a limited company, you need to register your new working status, and there are deadlines for doing this after you start earning locum income.
- You’ll likely need to set money aside as you earn. Since tax isn’t deducted automatically, building the habit of setting aside a portion of each payment protects you from a shortfall when the bill arrives.
- Payments on account can catch people out in year two. Once you’ve had one year of Self Assessment tax due, HMRC may ask you to pay part of the following year’s estimated tax in advance, which can mean a larger-than-expected bill in your second year.
Mistakes GPs commonly make during this transition
- They spend locum income as if it’s already net of tax, the way salaried pay is, then find themselves short when the tax bill arrives.
- They delay registering with HMRC, risking penalties for late registration.
- They don’t decide early enough between sole trader and limited company structures, even though this decision affects how income is taxed from day one.
- They forget that NHS pension contributions work differently for locum income, and don’t check how this affects their ongoing pension position.
What should you check before making the switch?
Check the HMRC registration deadlines that apply to your situation, since these are time-limited from when you start locum work. Decide whether sole trader or limited company status suits your expected income level, since this affects both your tax treatment and your admin responsibilities. Set up a separate way of tracking and setting aside tax as you earn, rather than treating it as a problem for the following year.
When should you get professional advice on this?
This is a genuinely good point to speak to an accountant, ideally before your first locum shift rather than after your first tax bill. They can help you decide on the right business structure, register you correctly, and set realistic expectations for what you’ll owe and when.
Frequently asked questions
Do I pay more tax as a locum than as a salaried GP?
Not necessarily. The rate of tax you pay depends on your total income, not on whether you’re PAYE or self-employed. What changes is the timing and method of payment, not automatically the amount.
How soon do I need to register with HMRC after starting locum work?
There are specific deadlines for registering as newly self-employed or for setting up a limited company. Check current HMRC guidance for the exact timeframe that applies to your situation.
Should I set up a limited company straight away?
It depends on your expected income level and plans. Many locums start as sole traders and consider incorporating later, but this decision is worth reviewing individually rather than following a fixed rule.
Why did my tax bill increase in my second year as a locum?
This is often due to payments on account, where HMRC asks you to pay part of the following year’s estimated tax in advance, on top of the tax due for the year just finished.
Does switching to locum work affect my NHS pension?
Yes, the contribution structure works differently for locum income compared to salaried PAYE income. Check how this applies to your specific situation before switching.
Related reading
- How the Personal Allowance Taper Actually Works (Beyond the 60% Trap)
- Salaried GP vs GP Partner: Which Pays More After Tax?
- How Much Tax Do NHS Doctors Pay in 2026? A Full Breakdown by Grade
- Can NHS Doctors Retire at 55, 57, or 60? The Financial Implications
Find out what your tax position looks like before you switch
Moving from salaried to locum work changes more than your payslip. The Tax Hack X-Ray Scorecard is a two-minute diagnostic built for doctors that checks your income, allowances, and reliefs for gaps worth knowing about before you make the switch.
It helps you:
- See where your current tax position stands before anything changes
- Spot allowances and reliefs you may not be using
- Get a clear next step, whether that’s a simple fix or a conversation with an adviser