"Locum" sounds like one job, but for tax it can be two completely different things. A hospital locum and a GP locum can earn similar money in the same week and end up paying tax, National Insurance and pension contributions in very different ways.
The reason is simple. Tax follows how you actually work, not the word on the rota. A hospital shift booked through a trust is usually employment. Freelance GP locum sessions billed to a practice are usually self-employment. That single distinction drives almost everything else.
This guide compares the two for 2026/27. It covers how each is taxed, how National Insurance works, how the NHS Pension Scheme treats them differently, and where IR35 catches doctors who work through a limited company.
It is written for doctors who locum, whether you do it full-time, alongside a substantive post, or as you move between training jobs. If you want this handled properly, that is what we do at Zmartly for locum doctors.
Is a hospital locum taxed differently from a GP locum?
Usually, yes. A hospital locum working bank or agency shifts for an NHS trust is normally an employee for that work, so PAYE deducts Income Tax and Class 1 National Insurance before you are paid. A freelance GP locum invoicing practices is normally self-employed, so they receive gross pay and settle Income Tax and Class 4 National Insurance through Self Assessment. The headline rates are the same. What differs is who deducts the tax, when you pay it, what you can claim, and how you build NHS pension.
Why does employment status decide everything?
HMRC does not care what your role is called. It cares how the work is done. Employment status for tax turns on things like whether you must do the work personally, whether the engager controls how and when you work, and whether there is mutuality of obligation to offer and accept work.
You can be employed for one engagement and self-employed for another at the same time. As gov.uk puts it, someone can be both employed and self-employed, for example employed for shifts at a trust and running their own freelance practice alongside. HMRC may also treat you as self-employed for tax even where your status in employment law differs.
This matters because a hospital locum and a GP locum usually sit on opposite sides of that line:
- A hospital locum booked through an NHS trust's staff bank, or placed by an agency, is generally engaged like an employee. The trust controls the shift, you turn up and do the work personally, and you are paid through payroll.
- A freelance GP locum typically chooses which sessions to accept, invoices the practice, can in principle send a suitably qualified substitute, and carries their own business risk. That looks like self-employment.
If you are unsure which side you fall on, HMRC's Check Employment Status for Tax (CEST) tool gives a view, and HMRC says it will stand by the result as long as the information you give is accurate and matches its guidance. Getting status wrong is expensive: HMRC can recover unpaid tax and National Insurance with penalties from whoever got it wrong.
How is a hospital locum taxed?
If you locum for an NHS trust through its bank or an agency, you are almost always taxed as an employee for that work.
That means:
- PAYE deducts the tax at source. Income Tax and employee Class 1 National Insurance come off before the money reaches you. You do not get a gross fee to manage.
- Class 1 National Insurance applies. For 2026/27 the employee main rate is 8% on earnings between the primary threshold and the upper earnings limit, then 2% above it. The employer pays secondary Class 1 on top, but that is their cost, not yours.
- Tax bands are the standard ones. For 2026/27 the personal allowance is £12,570, the basic rate is 20% on the next £37,700 of taxable income, the higher rate is 40% from £50,271 to £125,140, and the additional rate is 45% above £125,140.
The big practical points for hospital locums are the personal allowance and the tax code. If you hold a substantive NHS post and also pick up bank or agency shifts, your second source of income often runs on a BR or D0 code, so the whole of it is taxed at basic or higher rate with no second allowance. That is correct, because you only get one personal allowance, but it can feel like the locum work is "taxed more". It is not a different rate, it is the absence of a second allowance.
Because PAYE already collects the tax, many employed-only hospital locums do not need to file a Self Assessment return at all, unless they have other untaxed income or income over the thresholds that require one.
How is a GP locum taxed?
A freelance GP locum is normally self-employed, and that changes the whole rhythm of your tax.
- You are paid gross. Practices pay your invoice in full. Nothing is deducted, so you must set money aside for tax yourself.
- You file Self Assessment. You report your profit (income less allowable expenses) and pay Income Tax on it at the same 20%, 40% and 45% bands above the £12,570 personal allowance.
- You pay Class 4 National Insurance, not Class 1. For 2026/27 Class 4 is 6% on profits between £12,570 and £50,270, then 2% above £50,270. Class 2 is no longer a flat weekly charge, but your contribution record is treated as maintained where profits reach the Small Profits Threshold of £7,105 for 2026/27.
- You pay in arrears, with payments on account. Income Tax and Class 4 for a tax year are due by 31 January after it ends, and HMRC usually asks for payments on account towards the next year on 31 January and 31 July. New locums often get caught out by the first 31 January bill landing alongside a payment on account.
There is one more thing on the horizon. Making Tax Digital for Income Tax starts from 6 April 2026 for sole traders and landlords with qualifying income over £50,000 (based on 2024/25), bringing quarterly digital updates. Many full-time freelance GP locums will be inside that first phase, so digital record-keeping is no longer optional.
Our self-assessment service is built around exactly this kind of freelance income, and you can sense-check your numbers with the self-employed tax calculator.
How does the NHS pension differ for each?
Both can stay in the NHS Pension Scheme, but the route in is completely different, and this is where the two locum types diverge most.
Hospital locums (employed). If your bank or agency shifts are pensionable NHS employment, pension contributions are usually handled through payroll, just like any other NHS employee. Your tiered member contribution is deducted from pay and the employer pays its share. There is little for you to do beyond making sure you have been put into the scheme. The member contribution tiers and the employer rate are set by the NHS Pension Scheme, so always confirm the current tier that applies to your pay with your employer or NHSBSA.
GP locums (self-employed). Freelance GP locums are not on a payroll, so the scheme cannot deduct contributions automatically. Instead you pension your locum income yourself using the GP locum process: you complete the relevant locum forms (commonly known as Forms A and B) and pay both your member contribution and the practice's contribution across to the scheme administrator within the scheme's deadlines. Crucially, only part of your fee is pensionable, because the scheme treats a slice of it as covering your expenses, so the practice's contribution is calculated on the reduced pensionable figure rather than your full invoice.
The key differences to hold in your head:
- A hospital locum's pension is largely automatic; a GP locum's is a monthly admin job you own.
- A GP locum must actively claim membership and meet the scheme's filing deadlines, or that work simply does not count towards pension.
- Pensionable pay for a freelance GP locum is based on a reduced figure, not the gross fee.
The NHS Pension Scheme rules, contribution tiers and locum deadlines are set by NHS Pensions and the relevant administrators, not by HMRC, so we have not quoted specific tier figures here. Confirm the live rates and deadlines with NHSBSA before you rely on them. What we can be precise about is the tax and National Insurance treatment that sits around the pension.
What about working through a limited company and IR35?
Some locums, more often hospital locums chasing flexibility, work through their own limited company (a personal service company, or PSC). That brings the off-payroll working rules, known as IR35, into play.
IR35 exists so that a worker supplying services through their own company pays broadly the same Income Tax and National Insurance as an employee would, where the reality of the engagement looks like employment.
Who decides your status depends on the client:
- For public sector clients (which includes NHS trusts) and large or medium private sector clients, the client decides your status and, if you are caught, the fee payer deducts Income Tax and employee National Insurance before paying your company.
- For small private sector clients, your own company is responsible for deciding your status and operating IR35 if it applies.
In practice, most NHS trust engagements treated as inside IR35 mean the tax is taken at source anyway, so the limited company gives you little tax advantage on that work. Where IR35 does not apply (genuinely outside engagements), a company can be more tax-efficient, because you can pay yourself a mix of salary and dividends. For 2026/27 the dividend allowance is £500 and dividend tax is 10.75% (basic), 35.75% (higher) and 39.35% (additional), with the company paying Corporation Tax on profits first, at 19% on profits up to £50,000.
The honest position for most NHS locum work is that the limited company route is about admin and liability, not a tax loophole. If you mix outside-IR35 private work with NHS shifts, it can earn its keep. If you only do NHS bank and agency shifts, it often does not. We talk doctors through this with our limited company and IR35 contractor services before they incorporate, because unwinding the wrong structure is harder than getting it right first time.
Illustrative example: the same fee, two routes
Illustrative example. Suppose Dr Amara earns a £500 session fee, once as an employed hospital bank shift and once as a freelance GP locum session. She is already a higher-rate taxpayer from her main income, so this £500 sits in the 40% band. Figures are simplified to show the mechanics, and ignore the pension contributions, which differ again.
| Step | Hospital locum (employed) | GP locum (self-employed) |
|---|---|---|
| Gross fee | £500 | £500 |
| Income Tax (40%) | £200 (via PAYE) | £200 (via Self Assessment) |
| National Insurance | Class 1 at 2% = £10 | Class 4 at 2% = £10 |
| When the tax is paid | At source, on payday | By 31 January after the tax year |
| Allowable expenses | Very limited | Business expenses reduce profit first |
On these simplified numbers the tax and National Insurance look the same, around £210 either way, because the rates are identical in the higher band. The real differences are timing and expenses. The hospital locum's tax is gone on payday with almost nothing to claim. The GP locum keeps the cash until 31 January, can deduct genuine business costs (such as medical indemnity, professional fees and mileage) before tax is worked out, but carries the admin and the discipline of saving for the bill.
These figures are illustrative. Your own position depends on your total income, your tax code, your expenses and your pension choices.
Which expenses can a locum doctor claim?
This is where self-employed GP locums have an edge, because employees can claim very little.
A freelance GP locum can deduct costs incurred wholly and exclusively for the work, which commonly include:
- Medical indemnity or defence organisation subscriptions.
- GMC registration and Royal College or faculty fees, where they relate to the work.
- Business mileage between locations (not your ordinary commute). HMRC's approved mileage rates let you claim 45p per mile for the first 10,000 business miles in a tax year and 25p per mile after that, if you use your own car and do not reclaim actual costs.
- A reasonable proportion of phone, equipment and admin costs.
You can estimate the relief on your travel with the mileage calculator. Employed hospital locums, by contrast, can only claim a narrow set of allowable employment expenses, and most ordinary travel and subscriptions either do not qualify or are already covered by the employer, so there is far less to reclaim.
Getting both the tax and the pension right at the same time is fiddly, and it is exactly what our team handles for locum doctors. If your status, your expenses and your NHS pension forms are not joined up, you can easily overpay tax or miss pensionable income that you never get back.
Want to know whether you are paying the right tax as a hospital or GP locum, and pensioning everything you should? Book a free call with a Zmartly accountant and we will review where you stand.
Frequently asked questions
Do hospital locums and GP locums pay different tax rates?
No, the Income Tax and National Insurance rates are the same. The difference is in how the tax is collected. Hospital locum shifts for a trust are usually employment, so PAYE deducts tax at source under Class 1 National Insurance. Freelance GP locum work is usually self-employment, so you are paid gross and settle Income Tax and Class 4 National Insurance through Self Assessment.
Why does my hospital locum income seem to be taxed more heavily?
It is usually the tax code, not a higher rate. If you have a substantive post and also do bank or agency shifts, the second income often runs on a BR or D0 code, so all of it is taxed at basic or higher rate with no personal allowance. You only get one £12,570 personal allowance for 2026/27, so it is applied to your main job, not the locum work.
Do GP locums have to pay National Insurance themselves?
Yes. As a self-employed GP locum you pay Class 4 National Insurance through Self Assessment, at 6% on profits between £12,570 and £50,270 for 2026/27 and 2% above that. Class 2 is no longer a flat weekly charge, but your record is treated as maintained where profits reach the £7,105 Small Profits Threshold for 2026/27.
Can a GP locum and a hospital locum both be in the NHS pension?
Yes, but the route differs. A hospital locum's pension is usually handled through payroll like any NHS employee. A freelance GP locum must actively pension their income using the GP locum forms and pay both contributions to the scheme administrator within the deadlines, with pensionable pay based on a reduced figure rather than the full fee. Confirm current tiers and deadlines with NHSBSA.
Should I set up a limited company as a locum doctor?
Often not for NHS work. NHS trust engagements are usually inside IR35, so tax is deducted at source and the company gives little tax saving. A company can help where you have genuinely outside-IR35 private work, because you can combine salary and dividends, but it adds admin and liability. Get advice on your specific mix of work before incorporating.
