Healthcare professionals working outside salaried PAYE roles face one of the most complex tax positions of any sector. NHS pension interactions with annual allowance, the IR35 status of locum work, expense rules around professional fees and indemnity, and the practicalities of running a limited company alongside salaried practice all combine into a planning landscape that rewards attention. This is where we sit in 2026.
NHS pension annual allowance issues
The NHS pension scheme is a defined benefit (DB) scheme. The "input" for annual allowance purposes is not the contribution paid but the growth in pension benefits during the year, multiplied by 16 (the standard DB factor). For doctors with significant pay rises, promotions, or additional pensionable income from locum work, this can create deemed inputs well above the GBP 60,000 annual allowance.
From 2023-24, the annual allowance was raised from GBP 40,000 to GBP 60,000, and the lifetime allowance was abolished. This relieved much of the pressure on senior consultants, but the tapered annual allowance still bites for adjusted incomes above GBP 260,000 (reducing the allowance by GBP 1 for every GBP 2 of additional income, to a minimum of GBP 10,000).
Scheme pays and the November deadline
Where an annual allowance charge arises in respect of NHS pension growth, the member can elect for "scheme pays" if the charge exceeds GBP 2,000 and the deemed input exceeds the standard annual allowance. Mandatory scheme pays elections must be made by 31 July of the year following the tax year. For 2024-25 tax year charges, that deadline was 31 July 2026.
We work with members to compute pension growth, the annual allowance position across all schemes (NHS, private SIPP, locum company contributions), and the cost-benefit of scheme pays versus paying the charge from personal funds.
Locum work: sole trader, Ltd, or umbrella
A salaried NHS doctor doing weekend locum work has three options:
- Sole trader: simplest. Income declared on self-assessment, expenses deducted. National Insurance Class 2 (until abolition) and Class 4.
- Limited company: tax-efficient for higher levels of locum income (typically GBP 30,000+ per year). Allows pension contributions from company profits, expense flexibility, and dividend planning.
- Umbrella: simplest for inside-IR35 locum engagements through an agency. Net pay broadly similar to sole trader after umbrella fees.
IR35 status applies to locum medical work the same as any other contracting. NHS trusts have generally adopted blanket inside-IR35 determinations for locum doctors engaged through PSCs, though framework variations exist. Private hospital and overseas work often retains outside-IR35 potential.
Pharmacist contractor structures
Locum pharmacists overwhelmingly operate through sole trade or a personal Ltd company. Pharmacy chains usually treat locum engagements as outside IR35 (genuine substitution, lack of mutuality, multiple concurrent engagements), making PSC operation viable. We help pharmacists model net take-home under each structure and structure pension contributions to maximise the lifetime cost-of-tax advantage.
Dental associate restructures
The 2023 reclassification of dental associates under HMRC's revised guidance (replacing the long-standing concessional approach) had immediate impact. Associate income is, in most cases, now subject to PAYE / NIC unless the associate operates a genuine business arrangement. We have helped associates restructure into either direct-debit relationships with the practice (genuine self-employment) or Ltd companies subject to IR35 review.
Allowable expenses for medical professionals
Common deductible expenses (for self-employed or company-paid):
- Professional registration fees (GMC, GDC, GPhC).
- Medical defence union subscriptions (MDU, MPS, DDU).
- Royal college fees and CPD subscriptions.
- Mandatory training and accredited courses.
- Stethoscopes, loupes, and clinical equipment.
- Mileage for travel to multiple work sites (not regular workplace).
- Professional indemnity insurance excess.
Expenses we routinely have to defend at HMRC enquiry: subscriptions to general medical journals (allowable), gym memberships (almost never), commuting between home and a single regular workplace (not allowable).
Private practice income
Consultants with mixed NHS and private practice income often operate the private practice through a limited company, with the NHS salary on PAYE. The company structure unlocks pension contributions, family member salaries (subject to genuine work), and tax-deferred profit retention.
How PushDigits supports medical professionals
We work with consultants, GPs, locum doctors, dentists, dental associates, and locum pharmacists across the UK. Our service covers company formation, monthly bookkeeping, payroll, VAT (where applicable for cosmetic and private practice work), self-assessment, NHS pension annual allowance computations, and scheme pays elections. Tax planning sits across the full picture, including inheritance and estate work for senior consultants. Book a session or read our healthcare sector page.