Perhaps the most important piece of personal financial planning that a self-employed locum GP must ensure is the amount of savings he or she is making for their income tax and national insurance liabilities. Matters are further compounded if the locum is obliged to make student loan repayments.
If we take a locum, who is in the NHS Pension Scheme and is making their monthly superannuation contributions, then the savings required for the fiscal year ended 5 April 2016, are as follows:
|Net income after expenses but before Superannuation||Percentage savings for income tax and NIC||Percentage savings for income tax and NIC and student loan repayments|
It should be stressed that the above percentage savings do not take into account any additional liabilities which may accrue on investment income such as bank or building society interest, dividends from shareholdings or rental income.
If you do have a mortgage it may be useful to have an offset mortgage and then your tax liabilities are saved in there. This would potentially help to shorten your mortgage term. Don’t be fooled into a limited company to avoid tax as you also avoid the NHS pension which is potentially worth its weight in gold!
Kevin Walker, NHS Pension Specialist, BW Medical Accountants. Blackett Walker is authorised & regulated by the Financial Conduct Authority.