NHS Locum & Self-Employed Tax Basics: A Plain-English Guide

This guide sits in our NHS Tax Relief & Expense Claims hub, and it covers one specific, narrower slice of NHS locum life than you might expect: the actual tax position of someone who is genuinely self-employed, trading as a sole trader (or occasionally through a limited company), rather than the far more common PAYE-bank-vs-umbrella-agency comparison that most "locum pay" content on the internet covers. If what you actually want is a comparison of bank PAYE pay against umbrella company pay for the same day rate — which is the situation most NHS bank and agency workers are actually in — our Locum & Bank Rate Calculator and NHS Bank vs Agency Pay guide already cover that comparison thoroughly, and we won't duplicate it here. This guide is for the smaller group of NHS-adjacent workers — often those doing independent clinical consultancy, private practice alongside NHS work, training delivery, supervision, expert witness work, or a genuinely independent locum arrangement not run through PAYE or an umbrella — who are actually self-employed for tax purposes, and need to understand what that means. It isn't tax advice, and for anything beyond straightforward orientation, a qualified accountant is worth the fee — we say that plainly throughout, not as a disclaimer afterthought.

Step one: are you actually self-employed?

This matters more than it might seem, because of IR35. Since April 2017, public sector bodies — including NHS trusts — have been responsible for deciding whether an engagement should be taxed as employment, even if the worker is nominally self-employed or working through their own company. NHS shifts booked through a staff bank or most agencies are very commonly assessed as "inside IR35" because of how they're supervised, scheduled and directed — which means the income is taxed almost identically to employment (Income Tax and National Insurance deducted before you're paid) regardless of how the arrangement is described.

Genuine self-employment for someone doing NHS-adjacent work typically looks more like: you invoice for your services rather than receiving a payslip; you have real, meaningful control over how, when and where the work is done; you can (in principle) send a substitute to do the work instead of you; you bear some financial risk (for example, you're not paid if you don't deliver, or you've invested in your own equipment); and you work for multiple, genuinely separate clients rather than one organisation that looks and feels like an employer in all but name.

• ✓ If tax and National Insurance are already deducted before you receive payment (PAYE bank shift, or umbrella company), you are employed for that income — this guide's expense and NI rules don't apply to it
• ✓ If you invoice for your work, receive gross payment, and control much of how the work is delivered, you may be genuinely self-employed — this guide is for that income
• ✓ It's entirely possible to have both types of income in the same tax year — a substantive NHS post plus separate self-employed work — and each is taxed under its own rules
• ✓ If you're unsure, don't guess — a genuine misclassification (treating employment income as self-employment, or vice versa) can lead to HMRC assessments, penalties and interest later

If most of what brought you here is actually a PAYE-bank-vs-umbrella-agency pay comparison, that's a different (and for most NHS locums, more common) situation — see our dedicated Locum & Bank Rate Calculator and NHS Bank vs Agency Pay Compared guide instead. Everything from here on assumes you've genuinely established that some or all of your income is self-employed.

Registering as self-employed with HMRC

Once you start receiving genuinely self-employed income, you need to register with HMRC — this is a separate step from anything your NHS trust or an agency does on your behalf, because as a self-employed person you are your own employer for tax purposes.

• ✓ You generally need to register once your gross self-employment income for the tax year exceeds £1,000 (the trading allowance) — below that, HMRC doesn't require registration or reporting
• ✓ The registration deadline is 5 October following the end of the tax year in which you started self-employed work — for example, if you started in November 2025 (within the 2025/26 tax year), you'd need to register by 5 October 2026
• ✓ You register online via GOV.UK, and HMRC will issue a Unique Taxpayer Reference (UTR) — a 10-digit number you'll need for every future Self Assessment interaction
• ✓ Registering doesn't automatically mean you owe tax — many locums register, file a return, and end up owing little or nothing once genuine business expenses are deducted — but the registration and filing obligation exists regardless of the eventual tax bill

Self Assessment filing obligations and deadlines

Once registered, you'll need to file a Self Assessment tax return covering the relevant tax year (6 April to 5 April) and pay any tax owed. The key dates to know:

• ✓ 5 October — deadline to register for Self Assessment if this is your first year of self-employment
• ✓ 31 October — deadline for a paper tax return (most people file online instead, which gives three extra months)
• ✓ 31 January — deadline to file online, and to pay any Income Tax and Class 2/4 National Insurance owed for the tax year that ended the previous 5 April
• ✓ 31 July — if you're required to make payments on account (advance payments toward the following year's tax bill), the second instalment is due on this date, with the first due the preceding 31 January alongside your balancing payment

Payments on account apply if your Self Assessment tax bill is more than £1,000 and less than 80% of your total tax is already collected at source (for example through PAYE on other income). Each payment on account is normally set at half of your previous year's tax bill, as HMRC's estimate of what you'll owe again — if your actual profits are lower, you can apply to reduce them, but reducing them incorrectly and ending up owing more at the balancing payment stage can itself trigger interest, so this is worth getting right rather than assuming a lower payment is automatically the safer choice.

• ✕ £100 automatic penalty for filing even one day after the 31 January online deadline, whether or not tax is owed
• ✕ Further daily penalties after 3 months, and percentage-based penalties on unpaid tax after 6 and 12 months
• ✕ Interest on unpaid tax accrues separately from these penalties, from the original payment deadline

What expenses can a self-employed NHS locum claim that an employed member of staff can't?

This is where genuine self-employment differs meaningfully from PAYE employment, umbrella pay, or even the flat-rate allowances employed NHS staff can claim (like the uniform laundering rebate). As a self-employed locum, you're generally entitled to deduct legitimate business costs — those incurred "wholly and exclusively" for your self-employed work — from your gross income before working out your taxable profit, and the range of what typically qualifies is genuinely wider than what's available to someone on a payslip:

• ✓ Accountancy fees — the cost of an accountant preparing your accounts or Self Assessment return is itself a deductible business expense
• ✓ Professional indemnity insurance, where you fund it yourself rather than it being covered by an NHS trust or a state indemnity scheme for your specific type of work
• ✓ Home office costs, for the proportion of your home genuinely used for the admin side of your self-employed work — either a fair proportion of actual household costs, or HMRC's simplified flat-rate option based on monthly hours worked from home
• ✓ Travel between different assignment locations, or to genuinely temporary workplaces — this is different from ordinary commuting to one regular, ongoing place of work, which generally isn't claimable even for the self-employed
• ✓ Mileage at HMRC's simplified rate — 55p per mile for the first 10,000 business miles in the 2026/27 tax year, 25p per mile after that (this rate rose from 45p for 2026/27, the first change since 2011) — as an alternative to claiming actual vehicle running costs
• ✓ Professional subscriptions and registration fees — NMC, HCPC, GMC or equivalent registration, and relevant professional body memberships, where these relate to your self-employed practice
• ✓ Training and CPD costs genuinely incurred to maintain existing skills and knowledge for your self-employed work, along with relevant books, journals and conference fees
• ✓ Equipment and specialist clothing bought and used specifically for your self-employed clinical work
• ✓ Business use of your phone and broadband, on a fair proportion basis
• ✓ Marketing, website and admin software costs, where you incur them to run your self-employed practice

Compare this with an employed NHS staff member, who — beyond a small number of specific HMRC flat-rate allowances like the £125 uniform laundering rebate or professional subscription relief — generally can't deduct ordinary work costs from their taxable pay at all, because employment expense relief is much more tightly restricted than self-employed business expense deduction. See our NHS uniform and laundry tax relief guide for what's available to employed staff specifically, and our wider Tax Relief hub for other employed-staff claims.

What you generally can't claim

• ✕ Ordinary commuting to a single, regular, ongoing place of work — even as a self-employed person
• ✕ Everyday clothing, even if you happen to wear it for work, unless it's genuinely specialist or protective clothing not suitable for everyday wear
• ✕ Client entertaining costs (though staff entertaining and some specific costs have narrower separate rules)
• ✕ Fines, and generally the cost of correcting your own errors or non-compliance
• ✕ Your own wages or 'salary' drawn from the business — as a sole trader, your profit itself is what's taxed, not a wage you pay yourself

National Insurance for the self-employed: Class 2 and Class 4

Self-employed National Insurance changed significantly from April 2024, and a lot of older content online still describes the pre-2024 rules, so it's worth being clear on the current position:

• ✓ Class 2 National Insurance is no longer compulsory for self-employed profits above the small profits threshold (£7,105 for 2026/27) — you're treated as having a qualifying year for State Pension and contributory benefit purposes automatically, without having to pay it
• ✓ If your profits are below the small profits threshold, you can choose to pay Class 2 voluntarily, at a low flat weekly rate, specifically to protect your National Insurance record for State Pension and certain benefit entitlement — worth considering if self-employed locum work is your only income in a given year and the amount involved is modest
• ✓ Class 4 National Insurance is charged at 6% on profits between the Lower Profits Limit (£12,570) and Upper Profits Limit (£50,270), and 2% on profits above £50,270 — these thresholds and rates apply for both 2025/26 and 2026/27
• ✓ Class 4 is collected through Self Assessment alongside your Income Tax, based on your actual profit for the year, rather than paid separately in-year

If you also have employed NHS income in the same tax year (for example, a substantive part-time post alongside self-employed work), your employed National Insurance is calculated and deducted separately through PAYE by your employer — the two systems don't automatically "net off" against each other in-year, though HMRC does apply an annual maximum to prevent genuinely excessive combined NI charges in edge cases, which is another reason mixed employed/self-employed income is worth an accountant's attention if the amounts involved are meaningful.

Should you use an accountant?

We'll say this plainly rather than hedge: genuinely self-employed NHS locum tax is a materially more complex position than PAYE employment, and if your self-employed income is anything beyond modest and occasional, a qualified accountant is very likely worth their fee. The areas where professional advice earns its keep most clearly are: correctly identifying which of your income is genuinely self-employed versus disguised employment (IR35 risk cuts both ways — misclassifying yourself either way can cause problems later); deciding whether a limited company structure ever makes sense for any genuinely outside-IR35 income; apportioning mixed-use costs like home office and vehicle expenses defensibly; and simply making sure you're not missing legitimate claims or, worse, making claims that don't hold up if HMRC asks questions.

For modest, straightforward self-employed income — a small amount of clearly separate consultancy or training work alongside a substantive NHS post, say — many locums manage their own Self Assessment return competently using HMRC's own guidance and online tools. The point at which an accountant's fee reliably pays for itself is usually where income becomes substantial, recurring, or involves any genuine ambiguity about employment status, expense apportionment, or whether a limited company would help.

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Self Assessment deadlines, expense rules and National Insurance thresholds are reviewed and updated every tax year — we'll email you if something material changes.

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Keeping records

• ✓ Keep invoices, receipts, bank statements and mileage logs for at least 5 years after the 31 January submission deadline for the relevant tax year
• ✓ Separate your self-employed income and expenses from any personal or employed-income transactions — a dedicated business bank account, even as a sole trader, makes this considerably easier
• ✓ Record mileage contemporaneously (date, purpose, start/end locations, miles) rather than trying to reconstruct it at year end
• ✓ If you use the flat-rate mileage or home-office methods, you still need enough records to show the underlying business use they're based on

Why you can rely on this page

• ✓ Self Assessment deadlines (5 October, 31 October, 31 January, 31 July) and the £1,000 trading allowance threshold are current HMRC rules, verified rather than assumed
• ✓ Class 2 National Insurance's move away from being compulsory (from April 2024) and the current Class 4 rates and thresholds are stated as they currently stand, not the pre-2024 rules that a lot of older content still repeats
• ✓ The 55p/25p mileage rate reflects the increase confirmed for the 2026/27 tax year, not the 45p rate that had applied since 2011
• ✓ We're explicit that a genuinely wide range of expenses is only available to genuinely self-employed income — not PAYE bank or umbrella pay — and we point you to the right guide if that's actually your situation
• ✓ This is general information, not personalised tax advice — for anything beyond orientation, we say plainly that a qualified accountant is worth involving

This guide is provided for general information only, is not affiliated with HMRC, the NHS or the Department of Health and Social Care, and is not personalised tax or accountancy advice. Self-employment status, IR35 assessments and expense eligibility depend on your specific facts — for anything beyond general orientation, check HMRC's current guidance or speak to a qualified accountant.

Frequently asked questions

Frequently asked questions

How do I know if I'm actually self-employed, rather than PAYE or umbrella? +

The clearest sign is how you're paid and who controls the work. If your NHS trust or an agency pays you through PAYE (with tax and National Insurance already deducted before you receive it) or via an umbrella company, you're an employee for tax purposes even though the assignment is short-term or irregular — you are not self-employed, whatever the work feels like day to day. Genuine self-employment for NHS locum work is comparatively rare because of IR35: since April 2017 in the public sector, it's the trust or agency — not you — that has to assess whether an engagement should be taxed as employment, and NHS shifts are very often judged 'inside IR35' because of how they're supervised and directed. If you're unsure which category you're in, check your last payslip or remittance: if tax and NI have already been deducted before you were paid, you're being treated as employed for that income, not self-employed. Our <a href="/calculators/locum-rate-calculator/">Locum & Bank Rate Calculator</a> covers the PAYE-vs-umbrella comparison in detail; this guide is specifically for the smaller number of NHS locums who are genuinely trading as self-employed.

Can I be both employed by the NHS and self-employed at the same time? +

Yes, and it's a common pattern — for example, a substantive Band 6 post four days a week alongside genuinely self-employed private practice, training delivery, or clinical consultancy on the side. Your employed income continues to be taxed through PAYE as normal by your employer, while your self-employed profit is reported separately through Self Assessment. HMRC simply adds both together to work out your total taxable income and which tax bands apply — there's no special penalty for having both, but it does mean you'll need to register for Self Assessment and file a return even though you're already 'in the system' through PAYE.

Do I need to register as self-employed even if I only earned a small amount? +

Generally yes, once your gross self-employment income for the tax year exceeds £1,000 (the trading allowance threshold) — below that, HMRC doesn't require you to register or report it at all, though you can still opt to if it's useful for other reasons. If you cross £1,000, you're expected to register with HMRC by 5 October following the end of the tax year in which you started, even if you ultimately owe little or no tax once expenses are deducted. Don't assume a small amount of locum income is beneath HMRC's notice — the registration duty is based on gross income, not profit.

What happens if I miss the Self Assessment deadline? +

HMRC applies an automatic £100 penalty for a tax return filed even one day after the 31 January online deadline, regardless of whether you owe any tax at all, with further daily and percentage-based penalties accumulating the longer it remains outstanding. Separately, unpaid tax itself starts accruing interest from the payment deadline. If you know you're going to miss a deadline — for example because you're waiting on information — contact HMRC as early as possible, since a 'reasonable excuse' appeal is generally treated far more sympathetically when raised proactively than after the fact.

Can I claim for scrubs, shoes or a stethoscope as a self-employed locum? +

Protective and specialist clothing genuinely required for your self-employed clinical work — and not suitable for everyday wear — is generally an allowable business expense, similarly to equipment like a stethoscope, fob watch or specialist bag you've bought and use for your locum work. This is a separate claim from the employed-staff uniform laundering flat rate (see our <a href="/tax-relief/nhs-uniform-and-laundry-tax-relief-explained/">uniform and laundry tax relief guide</a>), which applies to employees, not the self-employed. As a self-employed locum you generally claim your actual costs rather than a flat rate, so keep receipts.

Is travel from home to my usual assignment location claimable? +

This is one of the most misunderstood areas and worth getting right. HMRC generally treats travel to a single, regular, ongoing place of work in the same way for the self-employed as it does for employees — as non-allowable ordinary commuting, even if you're self-employed. Where self-employed locum work becomes genuinely claimable is travel between different, changing assignment locations, or to a temporary workplace you don't attend regularly over a long period — which is a common pattern for locum work precisely because assignments change. If your 'self-employment' actually consists of one long-running placement at a single site indistinguishable from a normal job, that's a sign worth discussing with an accountant, both for the travel claim and for whether the underlying self-employment status itself is really correct.

Do I still pay National Insurance if my profits are below the personal allowance? +

You won't generally pay Class 4 National Insurance on profits below the Lower Profits Limit, since it applies only above that threshold (£12,570 for 2025/26 and 2026/27). Since April 2024, Class 2 National Insurance is no longer compulsory for self-employed profits above the small profits threshold, though HMRC still credits you as if you'd paid it for state pension and benefit purposes. If your profits fall below the small profits threshold, you can choose to pay Class 2 voluntarily at a low weekly rate specifically to protect your National Insurance record — worth considering if locum work is your only income and you'd otherwise have a gap in your contribution history.

Can I claim a proportion of my mortgage or rent for a home office? +

Only for the proportion genuinely used for your self-employed admin — invoicing, bookkeeping, correspondence with agencies or trusts — and only if you actually work from a defined space at home for that purpose. Most NHS clinical work itself happens on-site, so the claimable proportion tends to be modest rather than dominant, unlike a fully home-based freelancer. HMRC offers a simplified flat-rate option based on hours worked from home each month as an alternative to calculating an actual proportion of household bills, which is far less admin-heavy and is what many locums with modest admin hours choose to use instead.

Should I set up a limited company instead of being a sole trader? +

For most genuinely self-employed NHS locum work, the honest answer is that a limited company rarely delivers the tax advantage it once did, precisely because of IR35 — if a trust or agency assesses your engagement as 'inside IR35' (common for NHS shifts), income run through a company is still taxed broadly like employment income, but you carry the extra cost and admin of running a company on top. A limited company can make more sense for income that's clearly 'outside IR35' — such as separate private consultancy, training delivery, or writing/education work that isn't a disguised NHS shift — but this is exactly the kind of structural decision where a genuinely qualified accountant's input, based on your actual mix of income, is worth paying for rather than guessing.

How long should I keep records for? +

HMRC generally requires self-employed records — invoices, receipts, mileage logs, bank statements — to be kept for at least 5 years after the 31 January submission deadline for the relevant tax year, considerably longer than most people assume. This matters in practice because HMRC can open a compliance check well after you've filed, and without records to back up a claimed expense, they can simply disallow it and charge tax (plus potentially penalties and interest) as though you'd never made the claim.