Locum Pharmacist: Sole Trader or Limited Company?

Locum Pharmacist: Sole Trader or Limited Company?

As a locum pharmacist, choosing the right business structure is a critical decision that impacts your finances, administration, and legal responsibilities. The two most common paths in the UK are operating as a sole trader or setting up a limited company.

This guide breaks down the pros and cons of each to help you make an informed choice.

Operating as a Sole Trader

This is the simplest and most common way to start your locum career. As a sole trader, you and your business are legally the same entity.

Pros:

• Simple Setup: Registering for Self-Assessment with HMRC is straightforward and free.

• Less Paperwork: Your accounting is simpler, generally requiring you to keep records of your income and expenses and file one Self-Assessment tax return each year.

• Privacy: Your financial details are not publicly available.

Cons:

• Unlimited Liability: There is no legal distinction between you and the business. If the business incurs debts, your personal assets could be at risk.

• Tax Inefficiency at Higher Earnings: All your profits are taxed as personal income, which can be less tax-efficient once your earnings pass a certain threshold.

For a full breakdown of managing your finances as a sole trader, see our UK Locum Tax Guide.

Operating as a Limited Company

Setting up a private limited company (Ltd) creates a separate legal entity. You become both a director (employee) and a shareholder (owner) of the company.

Pros:

• Limited Liability: Your personal assets are protected from business debts.

• Tax Efficiency: A limited company pays Corporation Tax on its profits, which is often at a lower rate than higher-rate Income Tax. You can then pay yourself a combination of a small salary and dividends, which can be more tax-efficient.

• Professional Perception: Some feel that operating as a limited company presents a more professional image.

Cons:

• More Complex & Costly: Setting up and running a limited company involves more administration (annual accounts, confirmation statements) and higher accountancy fees.

• IR35 (Off-Payroll Working Rules): This is a key consideration. If your working arrangement is deemed to be similar to that of an employee, you could be required to pay tax as if you were one, negating many of the tax benefits.

• Less Privacy: Company details, including the director's name and accounts, are published on the Companies House website.

Which is Right for You?

For most locums starting out, the simplicity of being a sole trader is the best choice. As your income grows and becomes more consistent, the tax efficiencies of a limited company may become more attractive.

We always recommend discussing your personal circumstances with a qualified accountant who can provide tailored advice.