Sole trader, limited company or umbrella: how to set up as a self-employed locum vet in the UK

Quick answer: Most locum vets in the UK start as sole traders. This means registering with HMRC as self-employed and completing a Self Assessment tax return each year. It is the simplest structure. A limited company becomes more tax-efficient when earnings consistently exceed around £50,000 per year. Umbrella companies sit in the middle: they handle your tax for you but take a fee and offer less control over your earnings.

One of the questions that comes up most often among vets considering their first locum placement is not about clinical skills or rates. It is about structure. What kind of entity should I be? Do I need an accountant? What is a limited company actually for? And where does IR35 fit in?

These are good questions. Getting the structure right from the start saves you from expensive corrections later. This guide covers the three main options available to UK locum vets, explains the differences in plain terms, and sets out the practical steps to get started.

What does it mean to be self-employed as a locum vet?

When you work as a locum, you are not employed by the practices you work for. You are a self-employed professional providing services under a contract. This means you are responsible for paying your own income tax and National Insurance, managing your own business records, and covering costs that an employer would normally bear: professional indemnity insurance, CPD, pension contributions, and periods without income.

Self-employment also gives you things that permanent employment does not: the right to set your own rate, choose your own shifts, work for multiple practices simultaneously, and structure your income in the most tax-efficient way available to you. The freedom comes with administrative responsibility. How much administrative responsibility depends on which structure you choose.

What is a sole trader and how do you set one up?

A sole trader is the simplest form of self-employment. There is no company to register; you are the business. Your personal income and your business income are the same thing in the eyes of HMRC.

To set up as a sole trader:

• Register with HMRC as self-employed. Do this as soon as you start earning locum income. You can register online at gov.uk. There is no fee. HMRC will set up your records and tell you when your first Self Assessment tax return is due.
• Keep records of your income and expenses. Every shift payment in, every legitimate business expense out. Good record-keeping makes your tax return significantly easier. Accounting apps like FreeAgent, QuickBooks, or even a simple spreadsheet work well for most locums.
• Submit a Self Assessment tax return each year by 31 January (for online filing). Your tax bill covers income tax and Class 4 National Insurance on your profits. You will also pay Class 2 National Insurance if your profits exceed the small profits threshold.
• Consider whether you need to register for VAT. If your annual turnover exceeds the VAT threshold (currently £90,000), registration is compulsory. Below that, it is optional.

Most locums starting out choose the sole trader route because it is fast to set up, cheap to run, and requires no ongoing Companies House filings. The main limitation is tax efficiency at higher income levels.

What is a limited company and when does it make sense for locum vets?

A limited company is a separate legal entity from you as an individual. You are a director (and usually a shareholder) of the company. The company invoices practices for your locum work, and you pay yourself a combination of salary and dividends from the company’s profits.

The tax advantage comes from this combination. Dividends are taxed at a lower rate than income tax on equivalent earnings. For locums with annual profits consistently above around £50,000, the tax saving from a limited company structure can run to several thousand pounds per year.

The trade-offs are real:

• Companies House filings. You must file annual accounts and a confirmation statement each year. These have a cost, usually paid to an accountant.
• Corporation tax return. The company pays corporation tax on its profits before any dividends are paid to you.
• More complex record-keeping. Separating company and personal finances requires more discipline and usually a business bank account.
• IR35 risk. If a practice or HMRC determines that your limited company arrangement looks like employment rather than genuine self-employment, IR35 rules can apply and eliminate the tax advantage. More on this below.
• Working with corporates: the most of the corporates are reluctant to work with locums that are set up as LTD. Independents are less reluctant. This is something to have in mind as it may be a limiting factor.

The general guidance from accountants who work with locum vets is this: start as a sole trader. Review your structure once your earnings are established and consistent. If you are consistently earning above £50,000 per year and your IR35 position is clearly outside, a limited company is worth considering.

What is an umbrella company and is it a good option for locum vets?

An umbrella company employs you and invoices the practice (or agency) on your behalf. You are paid through PAYE, meaning the umbrella company handles your income tax and National Insurance deductions before paying you. You receive a payslip rather than invoicing directly.

The advantage is simplicity. There is no Self Assessment return, no need to keep business records, and no IR35 concern because you are technically an employee of the umbrella company rather than a self-employed contractor.

The disadvantages are cost and control. Umbrella companies charge a weekly or monthly fee for their services, typically between £15 and £30 per week. You lose the ability to claim the full range of business expenses available to a self-employed locum. And because you are paid PAYE, the tax efficiency available through a limited company structure is not accessible to you.

Umbrella companies are generally most appropriate for locums doing occasional or short-term work who want to avoid the administrative overhead of self-employment entirely. For locums working consistently, the fees and reduced flexibility make it less attractive than either sole trader or limited company status.

What is IR35 and how does it affect locum vets?

IR35 is a set of tax rules designed to prevent what HMRC calls disguised employment: situations where a worker is effectively employed by a client but uses a limited company structure to pay less tax than they would as an employee.

If IR35 applies to your arrangement, your income from that engagement is taxed as if you were employed, eliminating the tax advantage of the limited company structure.

For most locum vets, genuine locum arrangements are outside IR35. The indicators that support outside-IR35 status include:

• Working for multiple practices rather than one long-term client
• The right to send a substitute locum in your place if you are unable to attend
• Using your own equipment and professional tools
• No requirement to attend regular meetings or follow a management structure
• Taking genuine financial risk, including periods without income

If you are considering a long-term placement with a single practice (several months or more on an exclusive basis), this warrants more careful IR35 consideration. Speak to an accountant who understands veterinary locum work before entering into any arrangement that resembles a long-term employment relationship.

How does the comparison break down in practice?

The table above is a starting point. Your own situation, income level, risk tolerance, and appetite for administration will determine which structure works best for you. Most accountants who work with locum vets recommend starting simple and reviewing as your income grows.

What are the first steps to take when starting as a locum vet in the UK?

Before you confirm your first locum shift, make sure you have the following in place:

• Current RCVS registration. Your licence to practise must be active and in good standing. Check your renewal date and confirm your CPD hours are up to date. Practices will ask.
• Professional indemnity insurance. The Veterinary Defence Society is the main provider for UK vets. Your cover must be in place before you set foot in a practice as a locum. Do not assume the practice’s insurance extends to you.
• HMRC registration as self-employed. If you are starting as a sole trader, register with HMRC at gov.uk as soon as you accept your first locum engagement. Penalties apply for late registration.
• A business bank account (recommended). Keeping your locum income separate from personal finances makes your record-keeping significantly cleaner and your tax return much easier.
• A simple invoicing system. You will need to invoice practices for each shift. A basic template, or an accounting app that generates invoices, is all you need to start.
• A rate in mind. Research the market, calculate your costs, and set a rate. You can negotiate the rates with the practices. Entering a negotiation without a number in mind rarely ends in your favour.
• Your profile on Ronda. Create your profile, add your qualifications, complete your skills matrix, and start browsing available shifts. The sooner your profile is live, the sooner you can start receiving bookings.

Should I get an accountant as a locum vet?

For most locums, yes, at least eventually. An accountant who understands veterinary locum work pays for themselves through the expenses they identify, the mistakes they prevent, and the time they save you. In your first year as a sole trader, a good accountant is particularly valuable: they will set up your records properly, advise on what expenses are allowable, and ensure your first Self Assessment return is filed correctly.

If your earnings are modest in the first year and you are comfortable with numbers, managing a sole trader return yourself using HMRC’s tools is entirely feasible. As your income grows and you begin considering a limited company, professional advice becomes more important.

Accountants who specialise in medical and veterinary locum work tend to be more useful than general practitioners, because they understand the specific expenses that apply (VDS, CPD, specialist equipment) and the IR35 considerations that are particular to your profession.

Frequently asked questions about self-employment for locum vets

Do I need to register with HMRC before I do my first locum shift?
Strictly speaking, you should register as self-employed with HMRC as soon as you begin trading, which includes accepting your first locum booking. Registration is done at gov.uk and is free. HMRC’s deadline for registration is 5 October in the tax year following the one in which you first earned self-employed income, but registering early gives you more time to set up your records properly.

Can I remain as a sole trader forever, or do I have to move to a limited company?
There is no requirement to incorporate. Many locum vets work as sole traders throughout their entire locum career, particularly those who prefer simplicity over maximum tax efficiency. The decision to form a limited company is a financial one, not a legal obligation.

What expenses can I claim as a self-employed locum vet?
Allowable expenses for locum vets typically include VDS or equivalent professional indemnity insurance, RCVS registration fees, CPD costs, professional subscriptions, equipment used solely for work, travel costs to and from placements (not a permanent workplace), and the cost of accountancy services. Expenses must be incurred wholly and exclusively for the purpose of the business. An accountant can help you identify everything you are entitled to claim.

What happens to my pension when I leave permanent employment to go locum?
When you leave a permanent role, you stop contributing to your employer’s pension scheme and they stop contributing on your behalf. As a self-employed locum, you are responsible for your own pension. You can open a self-invested personal pension (SIPP) or a stakeholder pension and make your own contributions. These contributions attract tax relief, which partly offsets the loss of employer contributions. Speak to a financial adviser about the right approach for your circumstances.

Does Ronda work with locum vets who are limited companies as well as sole traders?
Yes. Ronda works with locum vets and RVNs regardless of their working structure. Whether you invoice as a sole trader, a limited company, or through an umbrella arrangement, you can create a profile, browse shifts, and book directly with practices. There is no platform fee for locums.