Sole Trader or Limited Company for a Locum Vet
This question usually arrives second hand, from a colleague who was told a limited company saves tax. Sometimes it does. Often the saving is smaller than expected and comes with obligations that do not suit how a locum works.
On This Page
- Trading as a Sole Trader
- Trading Through a Limited Company
- The Points That Decide It for Locums
- How to Decide
The right answer depends on your income level, how stable it is, how much you need to draw, whether you have other income, and who you locum for.
Trading as a Sole Trader
You and the business are the same legal person. You keep records, submit a Self Assessment return, and pay income tax and Class 4 National Insurance on your profit whether or not you have drawn it.
It is simple, cheap to run and flexible. There is no separate set of accounts to file, no corporation tax return, and no rules about how you take money out. The trade-off is unlimited liability and, at higher profits, a tax rate that a company might improve on.
Trading Through a Limited Company
The company is a separate legal person. It invoices practices, pays corporation tax on its profits, and you take money out as a combination of salary and dividends, each taxed differently.
The potential saving comes from that split and from control over the timing of extraction. Against it sit real costs: company accounts and a corporation tax return, payroll, a separate business bank account, Companies House filings that are public, and the fact that money in the company is not simply yours.
The Points That Decide It for Locums
- How much do you need to live on?
- A company works best when you can leave profit in it. A locum who needs to draw everything they earn removes most of the advantage.
- Is your income stable?
- Irregular locum income and a company structure combine awkwardly, particularly around payroll and dividend timing.
- Does IR35 apply?
- If you work through a company for practices, the off-payroll rules may put the status decision with the practice. A determination that your engagement is inside the rules removes most of the benefit of the company.
- Do you have other income?
- Employment income, a partner practice share or property income all change the calculation, sometimes decisively.
- Is this permanent?
- Closing a company properly has a cost. Locuming for a year between jobs rarely justifies incorporating.
How to Decide
Compare the total tax and National Insurance under each structure at your actual expected profit, subtract the extra running cost of the company, and then ask whether the remaining difference is worth the additional obligations. For many locums it is not. For a consistently high earner who can leave profit in the business, it can be.
Last reviewed 3 August 2026. [REVIEWER DETAILS REQUIRED BEFORE PUBLICATION]
Frequently Asked Questions
At what income does a limited company start to make sense for a locum vet?
Can I switch later?
Do practices prefer to engage a company?
Run the Comparison on Your Own Numbers
Send us your expected income and what you need to draw. We will show you both structures side by side with the running costs included.