Taxing Questions

I have been talking to a lot of new locums recently and thought it would be useful to set out some of the questions I’ve been asked, which may be of interest to both new locums and salaried GPs.  I’d be happy to answer further questions in a future article – just email me at the address below.

I’ve been on PAYE up to now, so there’s no need to look at anything before I start self employment

Unfortunately PAYE does not always deduct the right amount of tax.  Doctors in training rotations are always at risk of their P45 not following them properly, or having overlapping employments – which can give rise to material under and overpayments of tax.

In addition, many doctors have not claimed for professional subscriptions and other costs.  In this respect we have recently been able to agree some training costs with the Revenue.  The contract of employment needs to be a training contract and you need to have a training number – with these, if the wording is right, we may be successful in a claim for training costs.

What do I do with my P45? 

Nothing at the moment.  Just retain it for your tax return to 5th April 2012

When will the Revenue confirm self employed status – my out of hours organisation needs it?

The Revenue does not confirm self employed status as such.  However, It will issue you with a UTR (unique tax reference), once you have registered for self employment, which the out of hours organisation might accept.

What are the pros and cons of forming a limited company?

In simple terms you can save national insurance, you may save tax (if you leave money in the company or if you have a low earning spouse) but you are not permitted to pension the income through the NHS scheme.  The loss of the 14% contributed by the PCT and the inability to pay your own contributions will generally outweigh the other benefits.  Each case needs to be looked at on its own merits.

What do I do with forms Locum A and B? How much money do I send?

These are sent to your local Primary Care support office.  You would normally agree your tier rate with them (usually starts at 6.5% - but will be amended depending on income levels).  You calculate your pension contributions by following the instructions on the form and send them with your cheque.  If you get stuck, your accountant can do it for you (for a fee) – but it’s not difficult to do yourself.

I have overseas rental income – surely you don’t need to know about that?

Yes – you are taxable on world income in nearly all cases.

If you can argue that you are not UK domiciled, then there are very complex rules for the taxation of overseas income not brought into the UK.  If the amount is more than £2,000, then you could choose to pay £30,000 of tax for the privilege of not declaring your world income – this won’t apply to many people!

My mortgage payment is greater than my rental income – so I don’t need to put that on my tax return.

You do still need to make a return of your rental income.  If you make a loss, then that loss can be carried forward against future rental income.  Note that capital repayments on your mortgage do not count – it is only the interest element that is eligible for tax relief.

Can I claim for smart clothes for work?

Sorry, no.  There are tax cases that confirm that clothing is partly for personal decency and thus not claimable.  Protective clothing would be deductible – but you don’t see too many white coats in general practice.

Liz Densley is medical specialist partner with Sussex Chartered Accountants, Honey Barrett, and is secretary of AISMA (the Association of Independent Specialist Medical Accountants). Contact her at liz.densley@honeybarrett.co.uk.

Honey Barrett

Honey Barrett

Liz Densley is medical specialist partner with Sussex Chartered Accountants, Honey Barrett, and is secretary of AISMA (the Association of Independent Specialist Medical Accountants). Contact her at liz.densley@honeybarrett.co.uk.
Honey Barrett

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1 Response

  1. Dr Emma O'Neill
    Having read the very interesting article above I wonder what you think of Umbrella companies? If I work in a practice as a locum I pay employer and employee contributions to the NHS pension scheme. If I work in the OOH I pay employee only. What happens if I work for PAYE for an agency to my income from them - is it pensionable? Can I put it into the NHS if the work is for the NHS or does it have to be a private pension scheme.THe agency were asking me to join and umbrella company and they were also suggesting I join another company to get the income pensioned? Its all very confusing? Dr Emma O'Neill

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