The NHS is the UK’s biggest employer and spends around £1.1 billion on locum staff annually. The stresses put on permanent healthcare professionals are well documented, but becoming a contractor is a positive solution for doctors and nurses who want to continue the work they care about without becoming burnt out.
With the ability to pick your own hours and develop new specialisms, as well as the increased financial compensation, it’s little wonder that increasing numbers of medical professionals are moving from permanent employment to NHS contract jobs.
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Should I join an umbrella company or form a limited company?
This is a question all contractors face and healthcare professionals are no exception. The decision is a personal one but here are some factors you may wish to consider:
- Reduce your administrative load
One of the biggest headaches of working in healthcare is the amount of administrative work you’re asked to do alongside caring for patients. Tax laws can be extremely complex and your time is precious, so it may be that the convenience of an umbrella company taking care of all tax-based admin outweighs the inconvenience of the fee you pay to them.
- Circumvents all IR35 worries
As the umbrella company is technically your employer, you don’t have to worry about being ‘caught out’ by HMRC and IR35. If you’re a locum doctor, you’re likely to be monitored by HMRC because of your high rates of pay, so working with an umbrella company removes the threat of being fined or taken to court for non-compliance.
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A limited company…
- Helps you maximise your take home pay
A lot of contractors use their limited company to pay themselves a nominal salary so they pay the minimum amount of tax and national insurance. They then top up their salary with dividends which are taxed less heavily. However, HMRC is cracking down on this practice and the threshold for tax-free dividends is lowering each year.
- Gives you access to certain jobs
It’s worth knowing that some NHS trusts operate a direct engagement model which means they won’t take on contractors who work under umbrella companies. This depends on your location, so it’s worth checking out how things are done in the region you want to work in before you make any decisions.
- Allow you to claim expenses
Running your own company means that you can claim things like travel, food and your personal medical equipment as expenses.
There’s no right way to be a contractor locum nurse or doctor, you simply have to know how you work best and what fits in with your life.
If you want to avoid a large amount of extra admin, and don’t mind taking the hit of tax and national insurance, then umbrella companies are an excellent way for locuming professionals to avoid getting into a taxation tangle.
If you are confident that you have the skills and time to devote to bookkeeping (or at least can hire someone who can) and you’re willing to keep immaculate financial records, running a limited company is the more lucrative option.