Locum Doctor Tax in 2025: Are You Making These Mistakes?

The world of locum GP work promises flexibility, freedom—and often, higher pay. But Locum Doctor Tax in 2025 is more complex than ever. With changing HMRC rules, increased scrutiny, and pension scheme shifts, even experienced GPs make these costly mistakes.

From missed expenses and IR35 confusion to errors in NHS pension forms and poor tax planning, the risks are real—and so are the financial consequences.

Whether you’re working full-time as a locum, combining salaried and freelance roles, or considering setting up a limited company, this guide will help you avoid the most common pitfalls. Here’s what every GP needs to know to stay compliant, save money, and take control of their tax position in 2025.

Mistake #1 — Not Knowing How You’re Actually Employed

It might sound obvious, but many GPs don’t realise that how they work determines how they’re taxed. In 2025, locums generally fall into one of three categories:

Employment Type	Tax Impact	Key Considerations
Self-Employed	You pay Income Tax + Class 2/4 NIC via Self Assessment	Must submit NHS Locum Form A & B for pension
Limited Company	Pays Corporation Tax; you take salary/dividends	Watch out for IR35 and pension ineligibility
Umbrella Company	Treated like an employee; tax deducted at source	Less flexibility, but less admin

If you’re unsure which category applies, use the HMRC CEST tool to assess your IR35 status. Mistakes here can lead to unexpected tax bills, penalties, or even loss of pension eligibility.

Important: Locum GPs earning £80K+ who set up a limited company for efficiency must still tread carefully. If your work mimics that of a salaried GP, you may still fall under IR35 rules—nullifying any tax savings.

Mistake #2 — Missing Out on Claimable Expenses

Too many locums still leave money on the table by under-claiming legitimate business costs.

Here’s what you can claim in 2025 as a self-employed locum:

• Travel Costs: Mileage at 45p per mile (first 10,000 miles), Train, tube, bus fares to practices, Parking (but not fines)
• Professional Costs: Medical indemnity insurance, GMC, BMA, and MDU subscriptions, Accountant fees (if related to locum work)
• Home Office Use: Flat rate method: £26/month, Or calculate proportion of household bills used for admin
• CPD & Training: Only if essential to current role, General development (e.g. leadership) is usually non-claimable
• Tech & Equipment: Phone bills (proportionate use), Laptop, stethoscope, medical bag

What you can’t claim: Commuting costs (e.g. from home to regular long-term practice), lunch on the go, or buying new clothing unless it’s protective (scrubs, for instance).

Tip: Use bookkeeping and receipt capturing tools such as Xero, QuickBooks, Expensify or Receiptbank to snap receipts and automate record-keeping. HMRC audits are rare, but if one comes and your records are sloppy, you could lose your deductions.

Failing to track your expenses is one of the most common errors in Locum Doctor Tax in 2025.

Mistake #3 — Misunderstanding NHS Locum Pension Forms

Contributing to the NHS pension scheme as a locum GP is possible—but the admin is often where it falls apart.

To contribute properly, self-employed GPs working through individual engagements must submit Locum Form A (detailing each job) and Form B (summarising earnings each month). Both must be submitted monthly and within strict time limits.

In 2025, many GPs are:

• Submitting forms late (and missing out on pension contributions)
• Sending incomplete or mismatched data
• Assuming their accountant or the practice handles it (they don’t)

Even worse, GPs working via limited companies or umbrella firms aren’t eligible to contribute to the NHS pension at all. That means no employer contributions—and a long-term impact on retirement income.

Also in play this year is The McCloud judgment which continues to reshape NHS pension calculations. If you’re affected, you may receive remedial statements backdated to 2015. These may require tax corrections, pension adjustments, or scheme pays decisions .

Important: If you’re unsure whether you’re handling Form A/B correctly, speak to a specialist accountant or NHS Pensions adviser. Don’t assume it’s being done for you—the burden is on the locum.

Mistake #4 — Not Planning for Tax Bills (Especially with the 2025 Basis Reform)

If 2024 was the year of confusion, 2025 is the year of unexpected tax bills.

Why? Because HMRC’s new Basis Period Reform is now fully in force and is one of the most overlooked changes in Locum Doctor Tax in 2025. It effectively means all self-employed GPs are taxed on income earned during the tax year (6 April to 5 April)—even if your accounting year is different.

If your practice year-end isn’t 31 March or 5 April, this could create transitional profits—an artificial spike in taxable income.

Here’s where many GPs go wrong:

• Not adjusting their income estimates
• Forgetting about payments on account (due Jan and July)
• Spending tax money before it’s due

Example: A GP earning £90,000 may suddenly be taxed on an extra £20K of transitional profit in 2024–25. You can spread this over 5 years, but if you forget to elect that—you could owe the full amount in one go.

Review your 2024–25 tax position now, especially if your year-end doesn’t align with the tax year. Budget monthly and keep a tax reserve account to avoid scrambling come January.

Mistake #5 — Going Limited Without a Tax Strategy

Setting up a limited company as a locum can be smart—if done right.

But many GPs still:

• Do it too early
• Don’t understand IR35 risk
• Take the wrong salary/dividend mix
• Lose NHS pension eligibility without realising

✅ When it works: If you earn over £80,000+, work with multiple clients, control your schedule, and don’t rely on NHS pension

❌ When it backfires: If you’re mainly working at one surgery for extended periods, HMRC may class you as an employee—bringing IR35 into play. That removes the tax benefit and adds risk of backdated liabilities.

Also, locum work via a limited company disqualifies you from NHS superannuation. You may need to set up private pension options—and fund both employee and employer sides.

Important: Talk to an accountant before incorporating. Ask for an IR35 risk assessment, salary/dividend planning, and pension impact modelling.

Mistake #6 — Ignoring 2025 GP Contract Changes That Affect Locums

Many locums assume GP contract changes only affect salaried partners. In 2025, that’s a dangerous mistake.

Recent updates include:

No ARRS Reimbursement for Locums

While the Additional Roles Reimbursement Scheme (ARRS) has expanded, the £82 million funding increase is only available for newly qualified GPs employed by PCNs—not locums .

If you’re hoping to secure work through ARRS posts, you may find funding unavailable, limiting your options.

Increased Global Sum Payments—But Not to You

The 6% uplift in global sum funding (backdated to April 2024) supports practices—but locum rates haven’t kept pace. Practices are under pressure, and some are capping locum fees or cancelling sessions as they rebalance staffing budgets .

Tighter Reimbursement Rules for Locum Cover

NHS England updated reimbursement limits for cover related to sickness, parental leave, and study leave—but these only apply to GP performers on NHS contracts. As a locum, you may not be covered.

Important: If you work long-term at a practice, ask about contract shifts, sessional roles, or direct employment options. They may offer more security, NHS pension eligibility, and stability in this shifting environment.

How to Avoid These Mistakes in 2025

Use this quick checklist to keep your tax affairs—and your income—in top shape this year:

• Know your employment status: Self-employed? Limited? Umbrella? Your tax depends on it.
• Track every deductible expense: Travel, home office, indemnity, subscriptions—record it all.
• Submit NHS pension forms (A & B) monthly: And keep track of deadlines to protect future retirement income.
• Plan for tax bills early: Use a separate account, understand payments on account, and review your position post-basis reform.
• Get IR35 and incorporation advice first: A limited company may work—but not without risk planning.
• Stay aware of GP contract changes: Especially reimbursement shifts, ARRS role exclusions, and rate pressures.
• Work with a specialist accountant: Generalists may miss locum-specific tax reliefs or pension rules.

How Nichols Medical Can Help

At Nichols Medical Accountants, we understand that tax isn’t just a box-ticking exercise—it’s a vital part of protecting your income, your pension, and your future as a locum GP. Whether you’re self-employed, running a limited company, or considering your next career step, our specialist team offers tailored advice that cuts through complexity. From managing NHS pension forms and ensuring you claim every allowable expense, to navigating basis period reform and avoiding IR35 pitfalls, we’re here to help you stay compliant, confident, and financially efficient.

If you’re ready to take control of Locum Doctor Tax in 2025, get in touch with Nichols Medical Accountants today. Let’s make sure your tax strategy works as hard as you do.

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Disclaimer: This article was written by the specialist medical accounting team at Nichols Medical Accountants. With decades of experience supporting GPs, locums, and healthcare professionals, our team offers expert, HMRC-compliant guidance on tax efficiency, pension strategy, and contract-specific planning. We’re trusted by locum GPs across the UK for our clear advice and practical solutions.

This article is for general guidance only and does not constitute personal tax advice. Information is accurate as of June 2025 and based on publicly available guidance from HMRC, NHS Pensions, and professional tax standards. We recommend speaking to a qualified accountant to assess your specific circumstances.