Sole trader or limited company
As a sole trader you pay Income Tax and Class 4 National Insurance on your profits through Self Assessment. A limited company pays Corporation Tax on its profits, and you take money out as salary or dividends.
A company brings extra administration: annual accounts, a Corporation Tax return and, if you pay yourself a salary, payroll. Compare the after-tax result for your own income before you switch.
The 2026/27 rates that affect the choice
Corporation Tax is 19% on profits up to £50,000 and 25% on profits over £250,000, with marginal relief in between.
From 6 April 2026, dividend tax rose to 10.75% at the basic rate and 35.75% at the higher rate, with a £500 tax-free allowance. Higher dividend tax reduces what you keep from company profits.
Dividends from your own company do not count towards the Making Tax Digital income threshold.
Who decides IR35 status
IR35 applies when you work through your own company. For a public sector client, including NHS trusts and other parts of the NHS, the client decides your status. Medium and large private clients also decide.
High street pharmacies are private sector, even when they provide NHS services. A client is medium or large if it meets two of these: turnover over £10.2 million, balance sheet over £5.1 million, more than 50 staff. Higher limits of £15 million and £7.5 million apply from 2027/28 at the earliest.
For a small private client, your own company decides.
Status Determination Statements and CEST
When a client decides, it must give you a Status Determination Statement with its reasons, and take reasonable care in reaching it. Keep a copy of every statement you receive.
HMRC's Check Employment Status for Tax (CEST) tool gives a view on status, and HMRC says it will stand by the result if your answers are accurate. A CEST result can serve as the Status Determination Statement.
HMRC withdrew its specific guidance on locum pharmacists in June 2023. Status now turns on the general tests, such as who controls the work and whether you can send a substitute.
Common questions
Is a locum pharmacist inside or outside IR35?
It depends on the terms of each engagement and how the work is done. Use HMRC's general tests and the CEST tool, and keep any Status Determination Statement you receive.
Who decides IR35 for an NHS trust locum?
The trust, as a public sector client. It must give you a Status Determination Statement with its reasons.
Does IR35 apply to sole traders?
No. IR35 applies when you work through your own limited company or another intermediary. Sole traders are covered by the general employment status rules.
Sources and further reading
Check the current official documents for the country and service where you will work.
- GOV.UK: understanding off-payroll working (IR35)
- GOV.UK: off-payroll working for clients
- GOV.UK: check employment status for tax (CEST)
- HMRC Employment Status Manual: locum pharmacists (ESM4270)
- HMRC Employment Status Manual: client size thresholds (ESM10006A)
- GOV.UK: Corporation Tax rates and allowances
- GOV.UK: tax on dividends
- GOV.UK: qualifying income for Making Tax Digital
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