Eight real-world scenarios covering the decisions locum doctors face most often — with the tax, pension, and take-home implications of each path. No jargon, just clear outcomes.
Your existing salaried pension accrual is preserved and continues growing with CPI + 1.5% revaluation. As a locum, you must submit a Type 2 form to each trust to continue building pension. Without these forms, pension accrual stops completely.
As a self-employed locum, you move from PAYE to Self Assessment. You can now claim allowable expenses (travel, indemnity, GMC, equipment) which reduce your taxable profit. At £110,000, you’re in the £100k personal allowance trap — but expenses and pension contributions can pull you below the threshold.
For the £104,000 earned inside IR35, the agency deducts tax and NICs via deemed employment. Running this through a limited company adds admin cost with minimal tax benefit — the deemed payment rules eliminate most advantages.
The £26,000 earned outside IR35 could benefit from a limited company — paying a small salary and extracting the rest as dividends. But £26,000 alone may not justify the setup and running costs (£1,500–£2,500/year in accountancy and filing fees).
Once adjusted net income exceeds £100,000, the £12,570 personal allowance tapers away at £1 per £2. On the £8,000 above £100,000, Dr Hussain faces an effective 60% marginal tax rate — losing approximately £4,800 in extra tax versus staying at £100,000.
Dr Shah had unused allowance of £5,000 (2023/24), £12,000 (2024/25), and £3,000 (2025/26) = £20,000 total. This fully absorbs the £18,000 excess. No tax charge.
Without carry forward, the £18,000 excess would be taxed at Dr Shah’s marginal rate of 40% = £7,200 tax charge. He could pay this via Self Assessment or elect Scheme Pays by 31 July 2027.
All £170,000 is aggregated for income tax. At this level, Dr Adeyemi is well into the £100k trap — personal allowance is completely lost. She is also an additional-rate (45%) taxpayer on income above £125,140.
Private practice income is not NHS-pensionable, but it counts towards adjusted income for the tapered annual allowance. With £170,000 threshold income plus £28,440 employer pension contributions (23.7% of £120,000), her adjusted income is approximately £198,440 — within striking distance of the £260,000 taper threshold.
Accrual stops, but existing benefits are preserved and continue to be revalued by CPI + 1.5%. When she returns, she submits fresh Type 2 forms and contributions restart.
If Dr Evans earns nothing during the break year, she has a full £60,000 of unused annual allowance to carry forward. Combined with any unused allowance from the two years before the break, this gives her significant headroom when she returns to higher-earning locum work.
Five Type 2 forms required — one per trust per tax year. Each trust calculates the contribution rate independently based on annualised pay from that engagement. Total pensionable earnings across all five trusts are combined for the annual allowance calculation.
Inside IR35: agency deducts tax and NICs. Take-home is similar to employment. Pension access depends on whether the agency has an NHS pension framework — many don't, meaning you lose the 23.7% employer contribution.
Lower headline rate, but the trust automatically offers NHS pension with the 23.7% employer contribution. On a £100,000 annual income, that's £23,700 in additional employer pension contributions — effectively making the real rate higher than the agency option.
Your existing accrual is preserved and revalued annually. As a locum, submit Type 2 forms to each trust to continue building pension. Without them, accrual stops.
Probably not. Inside IR35, deemed employment rules eliminate most tax advantages of a limited company. The admin cost and complexity usually aren't justified unless you have significant outside-IR35 income.
Allowable expenses and NHS pension contributions reduce your adjusted net income. If these bring you below £100,000, you keep your full £12,570 personal allowance.
Accrual pauses but existing benefits are preserved with CPI + 1.5% growth. The break creates unused annual allowance for carry forward, which can be valuable when you return to high-earning locum work.
It depends on the total package. Direct engagement usually includes NHS pension (23.7% employer contribution), which can make a lower headline rate more valuable overall. Always compare the full package.
Yes, but all income is aggregated for tax. Private income isn't pensionable but counts towards adjusted income for the tapered annual allowance. This can trigger pension tax charges on your NHS pension growth.
Book a free consultation and Kishan will model your exact position — with real numbers, not estimates.
These scenarios are illustrative and do not constitute tax, pension, or financial advice. Every doctor’s circumstances are different. Tax rates, allowances, and pension rules are for 2026/27 unless stated otherwise. Always consult a qualified Chartered Accountant for personalised advice.
Kishan Kedia ICAI, CAMS is a specialist accountant at AccTek with 20+ years of experience in locum doctor tax, NHS pension annual allowance, landlord tax, Section 24 planning and Making Tax Digital for Income Tax. He holds the ICAI qualification and is a Certified Anti-Money Laundering Specialist (CAMS).
Official guidance
For the latest HMRC and Companies House guidance, see Income Tax rates and allowances and Self Assessment tax returns. AccTek Ltd is an independent accountancy firm and is not affiliated with HMRC or GOV.UK.
AccTek is a member firm of the Institute of Certified Practising Accountants (ICPA). Our accountants have a wide range of qualifications and accreditations from trusted professional bodies such as the AAT, ICPA, and ACCA.
