Working as a locum vet comes with a range of advantages, benefits and opportunities, but the responsibility of having to handle your own finances is often not seen as one of these. Being responsible for one’s own finances and tax status is often burdensome and the added complication of changes to rules for the self-employed can be less than helpful.
Rule changes and problems with financial planning for the year ahead are two of the issues we hear about most from self-employed clients. Being aware of changes to rules can often feel like a job in itself and so we have highlighted one of the upcoming and most controversial rule changes that affects IR35 legislation. We have also set out our thoughts on the best tools to help you ensure you’re planning your taxes properly throughout the financial year.
Changes to IR35
If you’re self-employed, it’s crucial that you’re aware of key regulation changes like controversial amendments to IR35 legislation that are set to come into force at the start of the new tax year in April 2020. As a self-employed locum vet, you need to be prepared for how these changes could affect you or you risk losing out on thousands of pounds of your hard-earned cash.
IR35 is legislation that affects how self-employed people are taxed and aims to ensure that self-employed individuals who effectively work as regular employees are taxed as such, even if they choose to structure their work through a company.
Whilst already in use for the public sector, in April of this year, the changes are set to be extended to the private sector, placing the onus on the client to determine the status of any freelancers, contractors or locums that they use.
The extension of the changes to IR35 to the private sector is highly controversial and has been widely criticised by the self-employed sector. The government has pledged to review the legislation, and its future looks uncertain, but if you’re a locum vet it’s important that you ensure that you’re financially prepared regardless of what happens with the review.
Although the changes have been made with good intentions, a significant unintended consequence is that many employers may simply insist that all locums fall inside the legislation or stop using them altogether. The hefty fines and complexities around identifying status can be considered a real threat to those who are genuinely self-employed and our advice to anyone who is unsure about their status is to seek a professional chartered accountant who understands tax landscape for the self-employed.
As a locum vet, it’s crucial that you speak to your client to ensure that you’re both clear on where you stand on IR35. Misclassifying employment status has consequences in both directions and can have serious financial implications for both you and your client.
If you’re self-employed as a locum vet or trading through a limited company, you’ll need to take care when tax planning throughout the year. Your taxes would be due the following year, so it’s important to set aside money throughout the year so that you’re covered when the deadline for your self-assessment tax return comes around again in January.
In order to keep track of how much you’ll need to pay at the end of the year, it’s important to carefully monitor income, dividends and business expenses throughout the year. It is especially important for those who are self-employed to understand which income streams are taxable, in order to ensure you have everything organised for the year ahead.
Something you may need to be conscious of as a locum vet is the potential need to register for VAT. Locum vets will often be able to earn more than they could on a permanent salary; however, if you earn over £85,000 per year working as a locum, you’ll need to make sure that you’re registered for VAT.
In recent years, the growth of online tools like Freeagent has meant that dealing with invoices and tax planning is easier than ever before. However, dealing with your finances as a locum vet can still seem like a minefield and a burden on top of your veterinary work, given the specific requirements in terms of taxes for the self-employed.
To help with this, and to ensure that you have peace of mind about your finances more widely, it may be worth speaking to an accountant that specialises in working with self-employed people and locum vets in particular. Your accountant will be able to guide you through the web of detail that comes with handling your finances as a locum and can help you to make the most of software like Freeagent to keep track of everything, allowing you to focus on your work with the peace of mind that your finances are taken care of.