Guide
Locum doctor tax: PAYE, umbrella and limited company compared
Updated
A locum doctor's take-home depends less on the rate than on the route the money travels. The same £45/hour produces three different annual figures depending on how you are engaged.
The three routes, same rate
| Hourly rate | Annual gross | PAYE / bank | Umbrella (inside IR35) | Ltd co (outside IR35) |
|---|---|---|---|---|
| £45 | £79,200 | £56,493 | £50,153 | £55,387 |
| £60 | £105,600 | £70,685 | £63,410 | £67,854 |
| £80 | £140,800 | £85,782 | £76,403 | £84,477 |
Two things stand out. First, at the same headline rate, direct PAYE or bank engagement beats the umbrella route by £6,000–£9,000 a year, because the trust pays employer NI on top of your rate rather than out of it. Second, the limited company route only overtakes PAYE at higher rates, and then only for work genuinely determined outside IR35, which standard trust shifts are not; see IR35 for NHS locums.
What each route means in practice
- Agency PAYE or trust bank
- You are on a payroll: tax and NI deducted at source, no company to run, and bank shifts are usually NHS-pensionable. The headline rate is often lower than the equivalent umbrella rate, so compare like with like: an umbrella rate must be roughly 15% higher to match a PAYE rate.
- Umbrella (inside IR35)
- The umbrella employs you and funds its margin, employer NI and the levy from your assignment rate before PAYE. Salary-sacrifice pension through the umbrella is the one big lever: sacrificed pay escapes income tax, employee NI and the 15% employer NI.
- Limited company (outside IR35)
- Your company invoices, pays corporation tax, and you draw £12,570 salary plus dividends. Worth running only on genuinely outside-IR35 work and with an accountant, and the company can pay expenses and employer pension contributions before tax.
The NHS pension question
This calculator excludes pensions entirely, and for locum doctors that exclusion matters. Bank and directly engaged trust locums can usually join the NHS Pension Scheme for those shifts; umbrella and limited company locums generally cannot, though locum GPs doing surgery work can pension that income through the scheme's locum forms (NHSBSA: NHS Pensions). A route that shows a few thousand pounds less take-home but carries NHS pension accrual is often the better deal; take advice before choosing on the net figure alone.
Locum GPs engaged directly by practices as self-employed contractors sit outside this comparison: their income is assessed under self-assessment with expenses deducted under self-employment rules. Nothing on this page is tax advice.