Starting up a Limited Company Vs Umbrella Companies for Veterinary Locums
When veterinary locums come into the UK to work, they cannot just apply to an advert for a job and start working there and then. Potential locums have a bit of work to do first in order to meet the needs of immigration and the Inland Revenue. Assuming you have the qualifications and the right to enter the UK to work, we shall focus here on your income tax situation.

In the UK, you will pay tax on your earnings above a certain level. For 2010 and 2011, this will be £6,475 annually for anybody aged under 65. That means that any earnings above that figure will be taxed at the standard rate of 20% - this will remain at least until April 2011. That 20% stands for earnings up to £37,400 - earnings above that will be charged at 40%.

Once you are earning £150,000 annually, the portion over that figure is taxed at 50%. Additional to that, if you are classed as a UK resident, you will subject to National Insurance contributions, currently standing at 11% of your gross earnings.

So income tax can be quite complex to calculate, particularly when you may have a number of allowable expenses you can deduct from your gross earnings prior to the tax calculation. In order to be able to claim many expenses you must be self-employed. Keep that in mind meantime.

When you are working in the UK as a locum vet, you can choose a number of easy in which to pay taxes and claim your expenses. You could join an employment agency and have them pay you and also deduct taxes on a PAYE (Pay As You Earn) basis, but the agency would not pay your expenses. These will only be paid if you worked for a company, and as a veterinary locum you are liable to have a fair number of expenses.

You therefore have the option of becoming self-employed, which is not viable because the Inland Revenue Department (IRD) is very strict on what defines 'self employed'. Most veterinary practice will not offer work to a self-employed locum - you must at least be registered as a Limited Company, and this is what we shall discuss now in comparison to an 'Umbrella Company'.

When you sign up with an umbrella, you find a job and then the umbrella invoices the veterinary practice employing you for the agreed salary rate. The umbrella deducts your income tax and national insurance contributions, adds any expenses you are claiming and then deducts their own fee. The balance is deposited into your bank account. It sounds simple but it has its drawbacks, a major one being that the umbrella takes a proportion of your income as their fee.

For a limited company you must decide on a company name, make sure it has not already been used, set up a board (you can be the only member) and register your business. There is a great deal more than that and unless you have done this before you would be well advised to hire a formation agent who will do it all for you for around £200.

You then employ an accountant to look after your finances so that your books are all in order when inspected by the Inland Revenue or for VAT. If all of this sounds a bit complicated, it isn't really, because thousands start their own business up each year, and it can all be done online. A formation agent simply makes sure there are no hiccups.

Once you are a limited company you should be able to work for any veterinary surgeon in the land because they simply pay you for the work you have done and you look after your own taxes, insurances and so on. Basically, you are a contractor working in your clients' premises and that is the arrangement that most practices will prefer to employ you.

For them, it means that they don't have to worry about collecting your PAYE tax and national insurance and sending it to the right departments. It's a simple thing will full time regular employees, but occasional employees, such as locums, involves a bit more work. As a contractor you get the benefit of being able to work when you want, complete the work in your own way in your own time (in theory) but best of all, you can charge all of your expenses to your company.

The decision between an umbrella and a limited company is a no-brainer, although the umbrella is easier to set up. Once you are a limited company, however, that's you for life and you will no longer have any problems with tax and insurance issues with your employer.

For further information please e-mail us on and we will help you get in touch with our Chartered Accountant who specialises in tax advice for veterinary professionals.


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