- 3 mins read
If you’re heading into a salaried GP role, the good news is you won’t need to worry about any of the below. Your taxes will be calculated and paid before your salary reaches you, and your role doesn’t involve any financial or commercial liabilities.
If you’re about to start locum work or become a partner GP, then read on. There are some common financial pitfalls for GPs, and they often result in nasty surprises. Here’s what you need to remember.
1. Save the right amount for your tax bill
When you’re self-employed, you need to make two tax payments every year, typically by 31 January and 31 July. HMRC refers to that as ‘Payment on Account’.
They explain it with this example:
Your bill for the 2021 to 2022 tax year is £3,000. You made 2 payments of £900 each (£1,800 in total) on account towards this bill in 2021.
The total tax to pay by midnight on 31 January 2023 is £2,700. This includes:
You then make a second payment on account of £1,500 on 31 July 2023.
If your tax bill for the 2022 to 2023 tax year is more than £3,000 (the total of your 2 payments on account), you’ll need to make a ‘balancing payment’ by 31 January 2024.
GPs are sometimes tripped up the first time they’re due to make a Payment on Account. If you don’t pay correctly and on time, you face the prospect of a fine from HMRC.
2. Understand locum earnings and tax
If you’re performing locum work, you need to understand how your commercial status affects your financial obligations. Locums typically work as freelancers, sole traders, or limited companies. Each one has a different structure for earnings and tax.
For example, setting up a limited company would let you pay corporation tax on the earnings, then pay yourself a dividend or a salary, or a mix of both. Freelancers and sole traders are self-employed, so would pay their tax through self-assessment, making Payment on Account.
If you’re operating through a limited company, you mustn’t forget IR35. The government tightened the rules on off-payroll working to:
‘…make sure that a worker (sometimes known as a contractor) pays broadly the same Income Tax and National Insurance as an employee would. The rules apply if the worker who provides services to a client through their own intermediary would have been an employee if they were providing their services directly to that client.’
If the work you do falls within IR35, your earnings are taxed in exactly the same way as if you’d been an employee. Officially, it’s the client’s responsibility to determine whether IR35 applies. However, in the long term, it wouldn’t be wise (or ethical) to let a practice make a mistake.
3. Understand the partnership agreement
If you’re becoming a partner GP, your partnership agreement will cover:
Make sure you fully understand the agreement, and the implications for you. Be sure that you’re not assuming a level of risk or liability that you’re not prepared to handle. With that in mind, it is essential that you carefully read the small print of the agreement. Obvious as that sounds, many GPs don’t do it, and plenty regret it.
When you’re starting out as a GP, choosing the right path and the right option of where and how to work might be a little overwhelming. If you need a sounding board, you can always talk to one of our team. We’re a group of talent specialists in primary care, we’re champions of those who work there, and we’re here for you whenever you have questions or need help.
Email email@example.com or call 0330 024 1345.