Working as a locum doctor, bank nurse or agency healthcare worker gives you the freedom to choose when, where and how much you work.
Hourly rates often comfortably exceed those on permanent NHS contracts too. But that flexibility comes with a trade-off.
Your tax affairs are significantly more complex than those of salaried NHS staff. Get them wrong and you risk unexpected bills, penalties or missed opportunities to reduce what you owe.
Whether you’re a GP locum operating through a limited company, a bank nurse picking up shifts across multiple trusts, or an agency allied health professional navigating IR35 for the first time — your tax position matters.
Understanding it is one of the most valuable things you can do for your finances.
This guide is designed specifically for NHS locums and bank staff in the 2025/26 tax year. It covers how your employment status affects the tax you pay.
It explains what expenses and professional fees you can legitimately claim. It breaks down how IR35 applies to healthcare workers. And it looks at what flexible working means for your NHS pension contributions.
By the end, you’ll have a clear picture of how to stay compliant with HMRC whilst keeping more of what you earn.
Understanding Your Employment Status as a Healthcare Worker
How you are taxed depends entirely on your working arrangement. Healthcare workers typically fall into one of three categories.
Agency or bank staff paid via PAYE
If you work through an NHS staff bank or nursing agency, you are likely employed and paid via PAYE.
Your employer deducts income tax and National Insurance before paying you. This is the simplest arrangement as your tax affairs are largely handled for you, though you should still check your tax code is correct and claim any eligible expenses.
Self-employed sole trader
Some locum workers, particularly GPs providing services directly to practices, operate as self-employed sole traders.
You invoice for your work, keep records of income and expenses, and submit a Self Assessment tax return each year.
You are expected to register with HMRC by 5 October following the end of the first tax year in which you start working this way.
Limited company contractor
Working through your own limited company was historically popular due to potential tax efficiencies. However, IR35 legislation has significantly reduced the benefits for most NHS locum work.
Your limited company pays Corporation Tax on profits and you pay yourself through a combination of salary and dividends. This route involves more administration and accounting costs.
IR35 and What It Means for NHS Locums
IR35 is tax legislation designed to identify workers who would be employees if not for an intermediary such as a limited company or agency.
If your working arrangement has the hallmarks of employment, you should normally pay tax as an employee regardless of how you invoice.
How IR35 applies to NHS work
Since April 2017, public sector bodies including NHS trusts are responsible for determining whether locum engagements fall inside or outside IR35.
In practice, most NHS trusts have applied blanket determinations that locum and agency work falls inside IR35.
This means tax and National Insurance are deducted at source by the fee payer (usually the agency or trust), you cannot claim the same expenses you could as a genuinely self-employed contractor, and the tax advantages of working through a limited company are largely eliminated.
Inside versus outside IR35
Being inside IR35 means you are treated as an employee for income tax purposes. Tax and National Insurance contributions are deducted from your pay before you receive it, similar to PAYE employment.
Being outside IR35 means you are treated as genuinely self-employed. You can pay yourself through dividends which attract lower tax rates and claim a wider range of business expenses. However, achieving outside IR35 status for NHS work is typically difficult.
Challenging an IR35 determination
If you disagree with the trust’s assessment, you have the right to challenge it. You can use HMRC’s Check Employment Status for Tax (CEST) tool to support your case, though this tool has faced criticism for producing inconsistent results.
Specialist advice from an accountant experienced in medical contractor tax is recommended if you wish to dispute a determination.
Tax Codes for Bank Staff with Multiple Employers
If you work bank shifts at multiple NHS trusts alongside a permanent position, managing your tax codes is crucial. Each employer uses your tax code to calculate deductions, and errors are common.
How personal allowance is allocated
Your tax-free personal allowance can only be used once. HMRC typically allocates your full allowance to your main employer.
Secondary employers may be given a BR (basic rate) code, meaning tax is deducted at 20% from the first pound with no tax-free amount.
Emergency tax codes
When you start working for a new employer without providing a P45 or completing a starter checklist, you may be placed on an emergency tax code.
- Code 0T removes your personal allowance entirely.
- Code BR taxes all earnings at 20%.
- Codes with W1 or M1 after them mean tax is calculated week by week or month by month without considering your cumulative position.
Emergency codes often result in overpaying tax. Once HMRC receives information from all your employers, they should issue correct codes and you may receive an automatic refund.
This can take months and you may need to contact HMRC to speed up the process.
Checking and correcting your tax code
Log into your Personal Tax Account at gov.uk to view all your tax codes. If you spot an incorrect code, you can update your employment details online or call HMRC on 0300 200 3300. Keep your P45s and payslips to hand when making enquiries.
Umbrella Companies Explained
Many agencies require locum workers to be paid through an umbrella company rather than directly onto the trust’s payroll.
Understanding how umbrellas work helps you assess whether the arrangement suits you.
How umbrella companies operate
An umbrella company employs you and handles payroll administration.
The agency pays the umbrella, which then pays you a salary after deducting income tax and employee National Insurance, employer National Insurance, pension contributions if applicable, and the umbrella company’s fee.
Advantages and disadvantages
Umbrellas simplify administration as you receive a payslip with all deductions calculated. You are entitled to employment rights including holiday pay, which is typically rolled up into your hourly rate.
Umbrella company fees reduce your take-home pay. The umbrella’s margin, employer National Insurance and sometimes the Apprenticeship Levy all come out of the rate the agency pays, leaving you with less than you might expect.
Regulatory changes from April 2026
The government is introducing legislation making recruitment agencies and end clients jointly and severally liable for PAYE and National Insurance that umbrella companies fail to pay.
This is intended to crack down on non-compliant schemes. Reputable umbrella companies will be unaffected, but workers should expect increased scrutiny of their arrangements.
Warning signs of problematic umbrella schemes
Be cautious of any scheme that promises higher take-home pay through loan arrangements where your pay is described as a loan that does not need repaying, offshore payment structures, or deductions labelled as expenses that are actually disguised salary.
These schemes are generally classed as tax avoidance and HMRC actively pursues participants. You could face demands for unpaid tax going back many years plus penalties and interest.
More information, guidance and updates on umbrella companies can be found on .GOV.
Tax Relief on Professional Fees and Subscriptions
Healthcare workers can claim tax relief on professional body memberships and registration fees that are necessary for your work.
You must pay these yourself rather than being reimbursed by your employer.
Claimable professional fees include
- The Nursing and Midwifery Council (NMC) registration fee is £120 per year. Basic rate taxpayers receive £24 relief whilst higher rate taxpayers receive £48.
- The General Medical Council (GMC) fee is £425 per year. Basic rate taxpayers receive £85 relief whilst higher rate taxpayers receive £170.
- Royal College of Nursing (RCN) membership fees vary by grade but you can claim tax relief on 100% of the amount paid.
- UNISON subscriptions vary but HMRC allows tax relief on 70% of the total fee paid.
- British Medical Association (BMA) membership fees vary by grade but qualify for tax relief on 100% of the amount.
- Health and Care Professions Council (HCPC) registration is £106 per year. Basic rate taxpayers receive approximately £21 relief whilst higher rate taxpayers receive approximately £42.
How to claim tax relief from HMRC
If your total employment expenses are under £2,500 per year, use form P87 to claim by post or online through your HMRC personal tax account.
You will need receipts or proof of payment for each professional fee. From 2024, HMRC has increasingly required physical evidence of payment rather than accepting claims without documentation.
If your expenses exceed £2,500 in any tax year, or you have other reasons to complete Self Assessment such as self-employment income, claim through your tax return instead.
You can backdate claims for up to four previous tax years. After a successful claim, HMRC will adjust your tax code so you pay less tax going forward.
Uniform Washing and Flat Rate Expenses
NHS staff who wash their own uniforms at home can claim tax relief using flat rate expenses. These agreed allowances mean you do not need to calculate or prove your actual costs.
Healthcare worker flat rate amounts
- Ambulance staff can claim £185 per year.
- Nurses, midwives, dental nurses, therapists and healthcare assistants can claim £125 per year.
- Hospital porters, ward orderlies and catering staff can claim £120 per year.
- Pharmacists and laboratory staff can claim £80 per year.
In addition, you can claim £12 per year for shoes where a prescribed style is required, and £6 per year for tights or socks where a specific colour is mandatory.
Eligibility requirements
To claim the uniform flat rate expense your employer must require you to wear a uniform, your employer must not provide laundry facilities or cleaning vouchers, and you must actually wash the uniform yourself at home.
If your employer reimburses some uniform costs but not the full flat rate amount, you can claim tax relief on the difference.
Mileage Claims for Healthcare Workers
If you use your own vehicle for work journeys beyond your normal commute, you may be able to claim tax relief on mileage.
This is particularly relevant for community nurses, midwives, locum GPs and staff who travel between multiple sites.
HMRC approved mileage rates
For cars and vans, you can claim 45p per mile for the first 10,000 business miles in a tax year, then 25p per mile thereafter.
For motorcycles, the rate is 24p per mile regardless of distance. For bicycles, the rate is 20p per mile.
What qualifies as business travel
You can claim mileage for journeys to temporary workplaces where you expect to work for less than 24 months, and for home visits if you are a community healthcare professional.
You cannot claim for ordinary commuting between your home and a permanent workplace. If you always work at the same hospital, your daily journey does not qualify.
Claiming the difference from HMRC
If your employer reimburses mileage at less than the approved rates, you can claim tax relief on the shortfall.
For example, if you receive 20p per mile but the approved rate is 45p, you can claim relief on the 25p difference.
Keep a detailed mileage log showing dates, start and end points, purpose of journey and miles travelled. HMRC may request this evidence to support your claim.
NHS Pension for Locum and Bank Staff
The NHS Pension Scheme remains one of the most valuable benefits available to healthcare workers. However, the rules for locum and bank staff differ from permanent employees.
Bank staff pension contributions
If you work NHS bank shifts, you should automatically be enrolled in the NHS Pension Scheme through the bank.
Contributions are deducted from your pay at tiered rates based on your pensionable earnings.
- Those earning up to £13,259 pay 5.2%.
- Earnings between £13,260 and £26,831 attract a 6.5% rate.
- The rate rises to 8.3% for earnings between £26,832 and £32,690.
- then 9.8% between £32,691 and £49,078.
- Higher earners pay 10% between £49,079 and £62,924.
- with rates of 11.3% to 12.5% applying above £62,925.
You can find out more about the NHS pension scheme and any pension rate changes on the NHSBSA website.
Self-employed locum GP pension
Freelance locum GPs working directly for practices can choose to pension their work, but must complete the correct paperwork.
Form A records each individual engagement and must be sent to the practice with your invoice. Form B is a monthly summary submitted to NHS England (PCSE) with your contribution payment.
Critical deadlines apply. Work cannot be pensioned if it ended more than 10 weeks before your Form A application. Contributions for each month must reach PCSE by the 7th of the following month.
Limited company exclusion
If you invoice through a limited company, you cannot contribute to the NHS Pension Scheme for that work. This can be seen as a significant drawback of the limited company route for locum GPs.
Annualisation for locum GPs
Since all active members are in the 2015 CARE scheme, locum GPs must annualise their income to determine their contribution tier.
This involves dividing your total pensionable income by the number of days worked, then multiplying by 365. This can result in higher contribution rates than your actual earnings might suggest.
Self Assessment for Self-Employed Locums
If you work as a self-employed locum, you must register for Self Assessment and submit annual tax returns. This applies even if you also have PAYE employment.
Registration deadline
Register with HMRC by 5 October following the end of the tax year in which you start self-employment. For example, if you begin locum work in September 2025, you must register by 5 October 2026.
SA Filing deadlines
Paper returns must be submitted by 31 October following the end of the tax year. Online returns have a later deadline of 31 January. For the 2024/25 tax year ending 5 April 2025, the online deadline is 31 January 2026.
Payments on account
If your tax bill exceeds certain thresholds, HMRC requires payments on account. These are advance payments towards next year’s tax liability, due on 31 January and 31 July.
This can catch new locums off guard as you may face a large initial payment covering both the previous year’s tax and half of the following year’s estimated bill.
Allowable expenses for self-employed locums
Self-employed locum doctors and nurses can deduct legitimate business expenses including:
- professional indemnity insurance
- GMC or NMC registration fees
- medical equipment and instruments
- professional subscriptions such as BMA or RCN membership
- training and CPD courses
- travel between workplaces
- accountancy fees
- and business use of home if applicable.
Keep all receipts and records for at least five years after the submission deadline for that tax year.
Common Tax Mistakes for Locums and Bank Staff
Avoiding these frequent errors can save you money and prevent compliance issues.
Not checking tax codes across multiple jobs
Bank staff often accept emergency tax codes without question, overpaying tax for months before receiving a refund. Check your Personal Tax Account regularly and contact HMRC promptly about incorrect codes.
Missing expense claims
Many healthcare workers do not realise they can claim tax relief on professional fees, uniform costs and mileage.
Even small claims add up over a career. If you have never claimed, consider backdating for the last four tax years.
Failing to separate personal and business finances
Self-employed locums should open a dedicated business bank account. Mixing personal and business transactions makes accounting more difficult and increases the risk of errors or HMRC queries.
Missing NHS pension deadlines
Locum GPs who want to pension their work must submit Form A within 10 weeks of completing each engagement. Late forms are rejected regardless of when you receive payment.
Falling for umbrella company scams
Any scheme promising significantly higher take-home pay than standard PAYE likely involves tax avoidance.
HMRC investigates these arrangements retrospectively and participants face paying the avoided tax plus penalties. If it sounds too good to be true, it probably is.
Not keeping adequate records
Self-employed locums must retain records of all income and expenses. HMRC can enquire into tax returns up to six years after the end of the relevant tax year, or longer if they suspect fraud or carelessness.
Locum and Bank Staff Tax Key Takeaways
Your employment status determines how you are taxed. Agency workers paid via PAYE have tax deducted automatically, whilst self-employed locums must register for Self Assessment and manage their own tax affairs.
- IR35 legislation affects most NHS locum work. Since April 2017, NHS trusts determine whether your engagement falls inside or outside IR35, which significantly impacts your tax treatment.
- Healthcare workers can claim tax relief on professional fees including NMC, GMC, RCN and BMA subscriptions, plus uniform washing allowances and business mileage.
- NHS bank staff with multiple employers should check their tax codes carefully to avoid overpaying tax on emergency codes like BR or 0T.
- Self-employed locum GPs can contribute to the NHS Pension Scheme using Form A and Form B, but strict deadlines apply and limited company locums are excluded.
- Umbrella companies handle tax administration but take fees from your pay. New regulations from April 2026 will increase scrutiny of umbrella arrangements.
Locum and Bank Staff Tax Key Takeaways FAQs
Do I need to complete a tax return if I only work bank shifts?
Not necessarily. If all your income is taxed through PAYE and you have no other untaxed income or significant expense claims over £2,500, you do not need to register for Self Assessment. You should still claim allowable expenses through form P87.
Can I claim travel expenses between my home and the hospital?
Only if the hospital is a temporary workplace where you expect to work for less than 24 months. Regular commuting to a permanent place of work is not claimable. Bank staff who work at multiple trusts may be able to claim journeys to sites other than their usual base.
What happens if I am inside IR35?
Your fee payer, usually the agency or NHS trust, deducts income tax and National Insurance before paying you. You lose the ability to claim most expenses and cannot benefit from the dividend route that made limited company contracting attractive. Many locums inside IR35 choose to work via umbrella companies or direct PAYE engagement rather than maintaining a limited company.
Should I set up a limited company for locum work?
For most NHS locum work determined to be inside IR35, a limited company can offer little tax advantage and involves additional costs and administration. However, some locum GPs and consultants working in ways that place them outside IR35 may still benefit. Seek specialist advice from an accountant experienced in medical contractor tax before deciding.
Can I contribute to the NHS Pension Scheme as a locum?
Locum GPs working directly for practices can contribute by completing Forms A and B. Bank staff are usually enrolled automatically. However, anyone invoicing through a limited company or agency cannot contribute to the NHS Pension Scheme for that work.
How far back can I claim tax relief on professional fees?
You can claim for the current tax year plus the previous four tax years. After that, the opportunity to claim is lost. If you have never claimed NMC, GMC or other professional fees, submit a backdated claim as soon as possible.
