Tax for locum doctors: mixed PAYE and locum income, and payments on account
Reviewed by Rob Webb, practising accountant since 2015 · Last reviewed September 2026 · Figures are for the 2026/27 tax yearReviewed by Rob Webb, practising accountant since 2015 · Last reviewed September 2026 · Figures are for the 2026/27 tax yearDo locum shifts on top of your salaried job? Shifts paid through PAYE, such as NHS bank and many agencies, are taxed like a job. If you invoice and get paid in full, you're self-employed for that work and must file a tax return.
What catches locums out? Not the tax, but the payment on account. £46,600 of first-year locum profit alongside a £42,000 salary means one January bill of £28,541.70: £19,027.80 of tax and National Insurance, plus £9,513.90 paid in advance for next year.
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It depends on how each engagement is paid.
Some locum work is taxed at source. Trusts, NHS bank arrangements and many agencies operate PAYE, so tax and National Insurance come off before you are paid. That is employment income and goes on the employment pages of your return.
Other locum work is genuinely self-employed. You invoice a practice or a trust, they pay your invoice gross, and nothing is deducted. That is self-employed income and goes on the self-employment pages.
If your gross self-employed locum income exceeds £1,000 in a tax year, you must register and file. The £1,000 trading allowance is nominal at this level; you will be claiming actual expenses.
Whether an engagement is employment or self-employment is a question of fact, decided by the working arrangements rather than by what the contract is called, and where you work through an agency or intermediary the off-payroll working rules may settle it for you. If several engagements look the same but are being treated differently, check rather than assume.
Here is a doctor for 2026/27 with a salaried post and locum work alongside it. The figures are illustrative.
| Amount | |
|---|---|
| Salary from NHS post (tax already deducted under PAYE) | £42,000 |
| Locum invoices raised | £58,000 |
| Allowable expenses (below) | £11,400 |
| Locum profit | £46,600 |
| Personal allowance | £0 — already used by the salary |
| Locum profit taxed at 20% (£42,000 up to £50,270) | £8,270 → £1,654 |
| Locum profit taxed at 40% (the remaining £38,330) | £38,330 → £15,332 |
| Income tax on locum profit | £16,986 |
| Class 4 NI at 6% on £34,030 (£12,570 to £46,600) | £2,041.80 |
| Balancing payment due 31 January | £19,027.80 |
| First payment on account, also due 31 January | £9,513.90 |
| Total leaving your account on 31 January | £28,541.70 |
| Second payment on account, due 31 July | £9,513.90 |
The expenses break down as: medical indemnity cover £4,200; GMC registration, royal college and professional body fees £1,150; courses, CPD and exam fees £1,600; medical equipment claimed as capital allowances £650; 3,200 business miles at 55p £1,760; accommodation for distant placements £980; journals, subscriptions and reference apps £260; occupational health and administrative fees £200; accountancy £600.
Payments on account are advance instalments towards next year's bill. HMRC assumes next year will look like this year, so it asks for half in January and half in July. They are triggered once you owe more than £1,000 and less than 80% of your tax is already collected at source.
So in the first locum year, January carries roughly one and a half years of tax at once. Nothing has gone wrong and you have not been charged twice — the £9,513.90 is credited against next year's bill. But it is a large, one-off cash shock, and it is why locums so often get in touch in February.
If your locum income is genuinely going to be lower next year, you can apply to reduce your payments on account. Reduce them too far and HMRC charges interest on the shortfall, so reduce on evidence rather than on hope.
| What you can claim | What to watch |
|---|---|
| Medical indemnity and professional negligence cover | Allowable in full where the cover relates to your self-employed locum work. If part of the cover relates to a salaried post, only the locum share belongs on the self-employment pages |
| GMC registration and licence fees | Allowable. Where the fee also covers salaried employment, apportion sensibly |
| Royal college membership, BMA and professional subscriptions | Allowable where the body is relevant to your practice |
| CPD courses, conferences and exam fees | Courses that maintain or update your existing skills are usually allowable. Training that qualifies you for something new often is not, so check before claiming a large course |
| Medical equipment — stethoscope, ophthalmoscope, dermatoscope, loupes, diagnostic kit | Capital items, relieved through capital allowances rather than as a running cost |
| Travel between locum placements | 55p a mile for the first 10,000 business miles in 2026/27, then 25p. Travel from home to a regular, ongoing workplace is commuting and is not allowable |
| Accommodation and subsistence for placements away from home | Allowable where the placement genuinely requires you to stay away |
| Journals, textbooks, clinical reference apps and subscriptions | Allowable where used for your practice |
| Occupational health checks, DBS and mandatory training required by placements | Allowable where required for the locum work |
| Scrubs and protective clothing | Protective and specialist clothing is allowable. Ordinary clothing worn to work is not |
| Home working for admin, invoicing, appraisal and revalidation paperwork | Flat rate by hours per month in 2026/27: £10 for 25–50 hours, £18 for 51–100, £26 for 101 or more. Telephone and internet claimed separately on a business-proportion basis |
| Accountancy and bookkeeping for the locum business | Allowable |
This is the part to be careful with, and the part where a page like this cannot give you the answer.
Pension contributions and their tax treatment are among the most complicated areas a doctor deals with. Whether particular locum work is pensionable, how contributions are handled, and how the annual allowance interacts with growth in a defined benefit scheme, all depend on facts specific to you: your scheme membership, the type of engagement, your total income, and your history of contributions.
These interactions can change the tax you pay and can create charges that arrive separately from the ones on this page. They can also, handled well, reduce your bill.
So the honest position is this: take your pension arrangements to somebody who deals with medical pensions specifically, and get advice on your own numbers. Do not work it out from a general guide, this one included. A filing service can put the right figures on a return once the position is established, but establishing it is specialist work.
For many locums, yes, and sooner than they expect.
Making Tax Digital for Income Tax replaces one annual return with four quarterly updates plus a final declaration. Whether you are in depends on qualifying income: gross self-employment turnover plus gross property income, added together, before expenses. Salaried NHS income under PAYE is excluded, as are partnership profit shares, dividends and pensions.
The doctor in the example has qualifying income of £58,000 — gross invoices, not the £46,600 profit, and ignoring the £42,000 salary entirely. That is over £50,000, so she is already in from 6 April 2026.
Quarterly updates for standard periods are due 7 August, 7 November, 7 February and 7 May, and they are cumulative: each covers from the start of the tax year to the end of that period, not the quarter in isolation. The final declaration is still due 31 January, and HMRC pre-populates employment and PAYE figures, pensions and state benefits at finalisation.
Penalties inside the regime are points-based: one point per missed quarterly update or return, £200 at four points and £200 for each miss after that. Late payment charges nothing up to 15 days, 3% at day 15 and a further 3% at day 30, then interest at 10% annualised charged daily from day 31 — and those late payment rules do not apply to payments on account.
If every one of your engagements is taxed under PAYE and you have no other untaxed income, you may not need a return at all — check HMRC's online tool before paying anyone. If you did one small piece of locum work and took under £1,000, the trading allowance covers you and there is nothing to file.
If your pension position is the real question — annual allowance, scheme pays, historic charges — you need a specialist in medical pensions, not a filing service, and we will say so. The same applies if you trade through a limited company or need an off-payroll status determination challenged.
Almost certainly payments on account. January carries your balancing payment for the year just ended plus the first instalment towards the next year, which is half of the year's bill. The second instalment follows on 31 July.
Yes, by applying to HMRC if you expect your income to fall. Base the reduction on a real expectation, because if you reduce it below what turns out to be due, HMRC charges interest on the difference.
Yes, where it relates to your self-employed locum work. Where a policy covers both a salaried post and locum work, only the part relating to the locum work belongs on your self-employment pages.
It depends on your total income. Your personal allowance is used by the salary, so locum profit stacks on top. Anything taking you above £50,270 in 2026/27 is taxed at 40%, and above £125,140 at 45%.
They are charged separately. Your salary carries employee National Insurance through PAYE, and your locum profit carries Class 4 at 6% between £12,570 and £50,270 and 2% above. Class 4 is calculated on your self-employed profit alone, not on the two added together.
Filed Tax files Self Assessment returns and Making Tax Digital quarterly updates for locum doctors with mixed PAYE and self-employed income. It is £25 a month, covering all four quarterly updates, the year-end final declaration, unlimited questions and deadline reminders, and the first month is free. Send us your figures and we will show you the January and July payments before anything is filed.
Rob is a Certified Xero Advisor with a BSc from the University of Salford. Last reviewed September 2026 against GOV.UK guidance current at that date. This guide is general information, not personal tax advice. Figures are for the 2026/27 tax year and can change at each Budget — always confirm the current numbers on GOV.UK or ask us to check your situation.