Specialist advice for Locum Doctors

Working as a Locum can give you flexibility and a varied work experience, but making sure you are being paid correctly and not storing up trouble with HMRC can be more difficult, which is where we can help.

Contact us today

Locums Paying Family Members

Why employ a family member?

Provided you bear in mind the points below, the cost of wages paid to a family member will be an allowable deduction from the profits of the business. It will be tax efficient to employ a family member if:

  • You pay tax on the profits of the business and the family member has no taxable income, or:
  • You pay tax at the 40% or 45% rate and the family member pays tax  at 20%.

But there must be commercial justification

This is very important – you must not charge wages to the business unless there is a commercial justification for doing so. The work must justify the pay.
The tax inspector may well ask questions about wages paid to family members, so it is important to be clear about the hours worked, the rate per hour and the duties involved – it is important to keep accurate records.
If your family member has no other employment income, then you can pay them up to £6,240 per year without having to deduct any tax or NIC or even needing to run a payroll, however, you will need to run a monthly payroll if the amount is above £6,240.

It is not enough simply to make an entry in the books for the wages – the family member must actually be paid, preferably by cheque or direct debit into their personal bank account.

This provides an audit trail if HMRC raise any query. However, please note that the wages should not be paid into a joint account. It could be argued that the taxpayer has not really paid the family member as the tax payer still has access to the money. It is suggested that the wages are paid monthly.

Some of our clients make pension contributions in place of wages for a spouse or civil partner who has worked in their business. As well as reducing a household’s tax bill this can help provide a pension for a non-working spouse or civil partner.

An Example

Dr Ali does some medical reports from his home. His 18-year-old son helps him out for five hours a week at £10.00 per hour, earning a total of £50 per week. This amount equates to £2,400 a year, assuming four weeks’ break.

Dr Ali can offset the £2,400 he pays his son against his profits for income tax purposes. Provided his son has no other income, he does not have to pay any tax on the money because he falls well below the annual tax-free personal allowance (£11,500 in 2017/18).

If Dr Ali had done the work himself and not employed his son then that £2,400 would remain part of his taxable profits for the year and he would be liable to pay tax on it. If he was liable to income tax at the higher rate of income tax of 40%, the household would have received only £1,440 (£2,400 less 40%) instead of the full £2,400. National Insurance contributions may reduce the household income even further.

l

Contact us for specialist medical accountancy services for Locums

If you’re looking to plan your finances for the future or trying to find an answer to a problem then get in touch today.

s

NHS PENSION REVIEW

Are you in danger of being hit with a huge tax bill on your pension growth? Our NHS Pension Review Service can provide an advance warning of impending pension issues.

Learn more →

U

TAX ENQUIRY PROTECTION

HMRC have increasingly got GPs in their sights and many Practices have been subject to lengthy tax investigations. Make sure you’re covered with our annual insurance scheme.

Learn more →

FREE

EXPERT CONSULTATION

Talk to one of our Medical Accounting Team for free. We can discuss your circumstances and how we can help you achieve better financial management, reduce your tax bills or plan for the future with a tailored fixed price plan.

Meet our team

We have a panel of subject experts and a team of professional accountancy support staff to make sure your specific needs are met reliably and cost effectively.

HOW WE CAN HELP

A specialist healthcare team to advise you
Call free for support at any time
Keep you up to date with the latest changes
No fuss, smooth process to change to us
Members of AISMA - Association of Independent Specialist Medical Accountants

What our clients say…

Dr Ravi Bansal, Locum GP

I’ve been with Nichols and Co for nearly 10 years with Debra being my accountant. I first contacted them when I received letters for tax arrears due to the wrong tax codes being applied during my hospital jobs.

Debra sorted this matter out and has always provided helpful and honest advice regarding tax matters. She has also helped my wife with her tax returns. I would definitely recommend their services for accounting matters with a special interest in helping doctors with their tax affairs. They are approachable, helpful and efficient.

Dr Jayran Mistry, Locum

Thank you for everything you at Nichols & Co have done for me with regard to my tax returns to date. I have always felt I am able to approach you with any question and that the answer is always helpful and thorough.

I am very grateful for how detailed, clear and efficient you are with tax returns and letters and for expediting things when needed. Every time I make contact with you I am met with polite staff and helpful advice and I have spoken with many of my friends about the service you provide and how good I think it is. I always recommend you. Thanks very much again, I really appreciate your hard work and help.