Over the past few years, many veterinarians have turned their back on permanent jobs in favour of locum work (currently, there are approximately 20,000 employed and self-employed vets in the UK). For many, the decision to go locum stems from a desire for flexibility, improved work-life balance and to develop their skills in diverse settings.
However, as accountants that work closely with locum vets, we understand that most locums are unsure whether they are doing their accounts correctly.
Without a good deal of experience navigating the world of accountancy, it can be challenging to know exactly what you’re doing. With our comprehensive guide to locum vet accounting, we aim to give you a helping hand and remove the stress of worrying about your business’ finances.
Can You Claim Expenses?
When working as a locum vet, you may be entitled to claim business-related expenses to offset your tax liabilities, whether you operate through an umbrella company or as the director of your own limited company. These expenses include the ones that can be deductable for corporation tax, which will result in more money for you. You can use our contractor tax calculator to calculate your take-home pay.
As a locum vet, you may be able to claim expenses on travel, veterinary equipment, insurance and training, just to mention a few. There are likely a wide array of expenses you may be entitled to claim, so check with a professional who can either give you the right accounting advice or do the accounting for you, if you prefer to just focus on growing your business.
Do You Need Insurance?
You’ll want to ensure that you’re protected against claims, so seeking insurance cover is an important step when working as a locum vet. Some practices may offer insurance while you’re working for them but, if this is not the case, you’ll want to take out public liability insurance cover, in the event that a client or the public is personally injured or suffers property damage due to your work.
Even if the practice does offer insurance, you may want to consider all the pros and cons of being covered by it. The main advantage is that you won’t pay for it. The downside is that a claimant may wait until the locum period is over to make a complaint against you; if this happens, you won’t be covered by the practice anymore and could end up being sued and having to pay huge legal bills. So, if you’re concerned about being found liable for claims made after you’ve left the practice, you may find it worth it to take out professional indemnity insurance cover.
Does IR35 Apply?
IR35, or ‘intermediaries legislation’ was first introduced in 2000 as a way of deterring contractors from working as disguised permanent employees and benefitting from tax advantages by working through an intermediary, which could be a limited company.
This legislation is often criticised for being confusing and too complex, so it’s important to get the best IR35 advice; after all, this can affect the way you work and pay taxes. IR35 only applies if you’re working through an intermediary – if you’re a sole trader, you are likely safe.
IR35 will determine how you can take funds from your limited company. If your contract is outside IR35, you can choose a tax-efficient salary and declare dividends from the business’ profits; on the other hand, if you’re caught by IR35, you’d have to pay normal tax and National Insurance contributions.
What About Your Pension?
This is an important question that many locum vets wonder about. If you’re a locum vet and operate through a limited company, you may have to organise a private pension arrangement. You can fund your pension through the limited company and benefit from the corporation and personal tax by doing this. If you’ve chosen to work as a sole trader, then you have to contribute to a personal pension scheme, but you will likely be able to claim tax relief when it comes to your annual tax return.
Pensions are a key subject when it comes to doing locum work, so it’s crucial that you do your research and seek professional advice on how best to proceed.
Getting Paid as a Locum Vet
There are several factors influencing the take home pay of locum vets in the UK. Typically, the closer you are to London, the higher the day rate will be, and practices will pay differing rates, depending on how prosperous the area is. And it goes without saying that experience also matters; the more experience you have as a locum vet (not just in terms of years but also in regard to the diversity of work you do), the more attractive you’ll be and the more you can expect to be paid. Average locum vet rates can range from around £200 to over £250 a day, depending on these factors.
How can you ensure that you get paid for the locum work you perform? How does it all work? Simply put, the practice that hires you is the one who pays you; there are, however, different ways that this money can reach your account.
Recruitment agencies don’t typically have a payment service, but they can help you to get paid correctly and on time. So, if you’re using a recruitment agency, you may find that they can ‘put pressure’ on the practice to ensure your payment process is going smoothly and that there are no mistakes or delays. You’ll determine how you wish to get paid in your contract. If you’re using an umbrella company, however, you can let them handle your contracts (or you can outsource this to a lawyer or accountant).
How do You Pay Taxes?
Every time you earn money as a locum, you have to pay taxes on it. The amount of taxes paid, as well as how and when you pay them, will depend on the operations structure you choose. The most tax-efficient way is to set up your own limited company, as you can maximise your earnings by retaining a large part of your wages.
These savings come from your National Insurance contributions and expenses that can be claimed. When you set up a limited company, you become a shareholder in the business and can pay yourself a part of the profit. This is called a dividend, and you will not pay National Insurance on this. When it comes to your expenses, as we’ve seen above, you’re allowed to claim a range of expenses by owning a limited company, such as accountancy fees and pieces of equipment. You pay corporation tax, of course, which is still set at a fixed rate of 19%.
As a sole trader, if you make over £11,850 in profit (for 2018/19), you have to pay a 20% tax rate; this figure rises to a huge 40% if you make over £46,350 of annual profit. If you choose to register as a sole trader, you have to let the HMRC know that you’re working for yourself in the first three months of being in business. You also have to pay tax on all profits, pay National Insurance contributions and file a self-assessment tax return every year. You can start off as a sole trader, if you choose, and then upgrade to a limited company later.
If you don’t do locum work often, you may want to pay tax via Pay As You Earn (PAYE), which means your taxes are already deducted when you receive a payment. A lot of practices actually prefer this option, as their employees will likely also be set up via PAYE. An umbrella company can be an efficient solution if you do occasional locum vet work.
You simply need to submit your timesheet and your rates, and the umbrella company will receive the money from the practice, make tax deductions, take a fee and then give you the rest. This is the best option if you don’t want the hassle of dealing with taxes when you rarely do locum work.
How to Set Up a Limited Company as a Locum Vet
There are several advantages to operating through a limited company, such as tax efficiency (your take-home pay will likely increase), limited liability which protects your personal assets in the event of insolvency and freedom to run your business the way you want to.
As contractor accountants, we can help you to form a limited company. This process is completely new for many locums, but we’ve done it a thousand times before at Gorilla Accounting and can help you to achieve your goal.
The first thing you need is a company name. You can choose any name you like that isn’t already in use; to make sure you have a unique name, check its availability at Companies House. You also need a business account, since the limited company is a separate entity. This is extremely important; should your company be sued or go into debt or liquidation, your personal assets will always be safe.
You may have to register for VAT as well, even though you may not need it for most of your locum work; knowing whether or not to charge VAT will depend on the type of jobs you do, so you’ll want to seek advice from someone who specialises in locum accountancy. However, you will have to register for VAT if you earn more than £85,000 (figure for 2018).
The process of setting up your own limited company is fairly quick, and at Gorilla Accounting, we can even have it done on the same day. This means your company will be up and running in no time, allowing you to start conducting business immediately.
How Can Gorilla Accounting Help?
Once you set up your own limited company, you may wonder what comes next.
As soon as your business is ready to go, your focus should shift to managing your finances. Because this can be such a complex and time-consuming task that never seems to end, you’ll want to leave it to an accountant who can help you pay your taxes on time, avoid incorrect paperwork and fines, and even legal action.
Since most people are attracted to locum work due to the flexibility it offers, we give you the option of managing your finances on the move with our FreeAgent bookkeeping solution, which can be found in our all-inclusive packages. This software lets you upload receipts, monitor your bank balance and receive tax notifications from any connected device.
We also offer other services in our packages. We can manage your business accounts effectively, submitting your financial statements, preparing and submitting your tax returns, HMRC record checks and liaising with Companies House, as well as preparing and submitting quarterly VAT returns.
Having a dedicated accountant means you’ll have all of your questions answered and your business finances streamlined. We can be your accountancy partner from just £85 + VAT per month (or, if you prefer, you can pay 12 months upfront and get 10% off your total fees).
Locum accountancy is not a simple subject and requires a lot of research and expertise. At Gorilla Accounting, we offer a host of accountancy services and professional advice that you can benefit from as a locum vet. From helping you set up a limited company to ensuring you’re making the right pension contributions, we take the hassle out of dealing with your business accounts and out of submitting your tax returns. This allows you to focus on the thing that matters most: your work.
