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Self-employment is becoming a popular option in the UK, with many individuals seeking more control of their career development and flexibility to improve their work-life balance.

However, for the self-employed, completion of Self-Assessment tax returns each year can be a daunting task. This is true for locum doctors working in NHS trusts under umbrella companies or operating as limited companies. Locum doctors operating in this manner experience need to dedicate time to managing the business and financial aspects of their own self-employment, including submission of an annual tax return.

When starting off as a locum doctor, compiling all of the necessary paperwork and government ID references related to your finances can be stressful. Below are some tips to make the process easier:

1. Compile your paperwork effectively

As a self-employed locum doctor, a full record of your accounts needs to be maintained to accurately track your expenses. Bank statements, interest, loans related to the company and any investments over the last tax year also need to be recorded. Filing paperwork, receipts and statements in preparation for your tax return is often a laborious process, therefore, many locum doctors often opt for using an online platform to organise their records and streamline the recording system.

2. Be aware of your deadlines

Taxpayers are assessed on their annual earnings, with the tax year running from 6th April to the following April. However, the deadline for completing a paper tax return is 31st October. If you prefer to file a tax return online, then the deadline is 31st January. With these deadlines in mind, it is worth considering that HMRC may experience busy periods around the deadlines of submission and it does not always cope with the burden. Helplines can also become inundated, should you require advice or help throughout this time.

3. Obtain your access codes

A unique taxpayer reference is required when applying for a tax return. This code is normally provided on correspondence from the HMRC. You will need this code to establish a government gateway account to obtain an activation code (normally distributed in the post).

4. Meticulously record and claim your expenses

All business expenses made through the company need to be accurately accounted for so that at the end of the financial year appropriate deductions from your tax bill can be made. Obvious expenses include travel, accommodation and motor expenses, however, business expenses may also cover subsistence, medical equipment, course fees, office equipment, uniform and professional subscriptions (such as BMA, GMS or MDU). There is some information related to claimable expenses featured on the HMRC website, however, if you seek further clarity it is advised to seek guidance from a registered accountant.

5. Keep records of gift aid donations

Taxpayers who pay higher-rate taxes may also claim tax relief on any gift aid. The amount of tax relief may be estimated using tax calculators available on some online services. Therefore, it is recommended to maintain accurate records of any gift aid donations associated with the business. If you are unsure of the tax relief available you could seek the advice of a contract accountant.

6. Invest in pension contributions and assess tax relief

Operating outside NHS trusts as a locum means you can potentially save tax by putting freelance income through a limited company, however, it means you are not eligible to pension such income through the NHS scheme. However, you can organise your own pension contributions. Tax relief is available on pension savings and higher rate taxpayers should pay considerable attention to this, as they may be able to claim significant tax relief on pension contributions made.

7. Consider if you need an accountant

If you are operating through an umbrella company, you may feel confident in completing your own tax return. On the other hand, if you operate a personal service company or attain income from a range of sources then you may benefit from sourcing a professional accountant to overcome the complexity in sourcing the required paperwork related to these business accounts, as well as calculating tax rates and liaising with HMRC. In general, entrusting an accountant to maintain accurate business records and file the relevant paperwork may prove worthwhile, especially during submission of tax returns once a year as it will save you considerable amounts of time, which you can then dedicate to patients or running your personal service company more efficiently.