NHS Locum Regulations: IR35, Tax and Pay Explained

WhatTheBleep
4 days ago
6 min read

Updated: 2 days ago

A diverse group of NHS locum doctors in scrubs smiling together in a hospital corridor.

If you work as a locum in the NHS, understanding IR35 is non-negotiable - get it wrong and you could face unexpected tax bills, compliance penalties, or both. This guide cuts through the jargon and gives you exactly what you need to know about off-payroll working rules, your tax obligations, and how to protect yourself.

What Is IR35 and Why Does It Matter for Locum Doctors?

IR35 is the shorthand name for the UK government's off-payroll working rules. Their purpose is straightforward: to ensure that contractors who would effectively be employees if they worked directly for a client pay broadly the same Income Tax and National Insurance (NI) as those employees do. If you deliver locum shifts through an intermediary - such as a Personal Service Company (PSC), a partnership, or an umbrella company - these rules almost certainly apply to you.

The rules were significantly reformed on 6 April 2021, shifting responsibility for employment status decisions from the individual contractor to the hiring organisation. For NHS locum doctors, this means your trust - not you - is typically the one deciding whether you fall inside or outside IR35.

One critical point that catches many doctors off guard: according to HMRC's official guidance, the off-payroll working rules apply on a contract-by-contract basis. You may be classed as inside IR35 for a Wednesday ward shift at one trust and legitimately outside IR35 for a different arrangement elsewhere. Never assume your status carries over between engagements.

How Locum Agencies and NHS Trusts Determine Your Status

When you secure a placement through one of the locum agencies operating in the NHS market, the employment status decision sits with the NHS trust (the client), not the agency. The trust assesses whether you would be considered an employee if you were engaged directly, and they must communicate this via a Status Determination Statement (SDS).

You are entitled to receive an SDS that explains the reasoning behind the determination, not just the conclusion. If you believe the determination is wrong, you can challenge it through the client-led disagreement process. Do not simply accept an incorrect status without pushing back - the stakes are too high.

The agency typically becomes the deemed employer once the SDS is issued, meaning it sits in the contractual chain between the trust and your intermediary. In that role, the agency carries the legal responsibility for making the correct deductions from your fees before you are paid.

Tax, Pay and National Insurance: What "Inside IR35" Actually Means

If your locum contract is determined to be inside IR35, the financial implications are significant:

Income Tax and employee National Insurance are deducted from your fees before payment reaches your intermediary.
The deemed employer (often the agency) must also pay Employer National Insurance and the Apprenticeship Levy directly to HMRC - these are costs on top of your fee, not taken from it.
You receive a net payment, similar in structure to PAYE employment, rather than a gross payment to your limited company.

There is one important update from February 2026 that locum doctors must be aware of: deemed employers are not required to deduct student or postgraduate loan repayments from your fees. If you have an outstanding student loan, you must manage repayments yourself by registering for Self Assessment and submitting a tax return. Missing this could leave you with an unexpected debt to HMRC at year end.

How to Check Your IR35 Status: A Practical Checklist

HMRC provides the Check Employment Status for Tax (CEST) tool, which is the official starting point for determining whether a given contract falls inside or outside IR35. While the NHS trust makes the final call for public sector work, understanding the criteria helps you spot errors in an SDS and make informed decisions.

Before accepting any locum contract, work through these steps:

Run the CEST tool for every new contract - do not assume the result will be the same as a previous engagement.
Request your SDS in writing before you begin work - you are legally entitled to it, including the reasons.
Check student loan obligations - if you have a loan balance, confirm you are registered for Self Assessment.
Review how you are being paid - gross to your PSC suggests outside IR35; net after deductions indicates inside IR35.
Avoid any scheme that claims to bypass the off-payroll rules entirely. HMRC is explicit that such arrangements are almost always illegitimate tax avoidance, and the liability ultimately falls on you.
Access HMRC's GfC4 guidance (Help to Comply with the Reformed Off-Payroll Working Rules), introduced in December 2023, for detailed compliance support.
Contact HMRC directly if you have a specific question that the CEST tool or published guidance does not answer clearly.

Compliance Risks Every Locum Doctor Should Know

The shift in responsibility introduced in April 2021 means that locum doctors working with NHS trusts no longer have control over their own status determination. This is a meaningful loss of autonomy and it creates several specific risks:

Incorrect SDS: Trusts can get it wrong. If an SDS incorrectly classifies you as inside IR35, you may be over-taxed. Challenge it promptly and in writing.
Tax avoidance scheme liability: Some intermediary arrangements are marketed as compliant workarounds. HMRC's guidance is unambiguous that schemes claiming to circumvent IR35 are treated as avoidance - and enforcement action is directed at the individual, not just the promoter.
Self Assessment gaps: Because deemed employers do not handle student or postgraduate loan deductions, doctors who assume these are being managed automatically will accumulate debt without realising it until a tax return is due.
Contract-by-contract risk: As noted above, your status is not fixed. Each new engagement with a different trust or through different locum agencies must be assessed independently.

Key Takeaways

IR35 status is not fixed - it applies contract by contract, so every new engagement must be assessed independently.
For NHS locum placements, the trust determines your employment status, not you or your agency.
You are legally entitled to a Status Determination Statement (SDS) that includes the reasons for the decision - request it before you start work.
If your contract is inside IR35, expect Income Tax and employee NI to be deducted from your fees before payment.
Student and postgraduate loan repayments are not deducted by the deemed employer - you must manage these yourself via Self Assessment.
Use the HMRC CEST tool for every new contract, even if you have used it before for a similar role.
Never use a scheme that claims to bypass IR35 - HMRC treats these as tax avoidance and you carry the liability.
If an SDS looks wrong, challenge it through the client-led disagreement process rather than accepting an incorrect determination.

Looking for a Locum Work?

Ready to find your next role? WhatTheBleep connects NHS and locum doctors with vetted locum agencies and career opportunities across the UK. Browse our locum agency partners or explore our career guides for junior doctors and consultants to take the next step with confidence.

This article is for informational purposes only and does not constitute tax or legal advice. Always consult a qualified accountant or tax adviser for guidance specific to your circumstances.