Sole Trader or Limited Company? The Financial Crossroads for UK Locum Optometrists

For a UK locum optometrist earning a standard rate of £300 per day, the decision between becoming a sole trader or forming a limited company isn't about prestige—it is about the volume of your workload.

The right structure depends entirely on how many days you plan to be in the testing room each year.

The Sole Trader: Simplicity for Part-Time Locums

If you are working a few days a week or providing cover on a semi-regular basis, the sole trader structure is often the most logical choice.

• Ease of Setup: You simply register for Self-Assessment with HMRC.
• Low Admin Burden: There is no need to file accounts with Companies House or manage a complex payroll.
• Tax Treatment: Your taxable income is simply your profit (income minus expenses), upon which you pay Income Tax and National Insurance.

The Verdict: If you are working fewer than 150 days a year, the administrative costs and accountancy fees associated with a limited company usually outweigh any potential tax savings. For simplicity and flexibility, the sole trader route wins.

The Limited Company: Tax Efficiency for Full-Time Locums

If you plan to work regularly—roughly 150 days a year or more—a limited company becomes the more tax-efficient vehicle for your earnings. Because a limited company is a separate legal entity, it opens up more sophisticated ways to manage your take-home pay.

• Strategic Withdrawals: You can pay yourself a small, tax-efficient salary and take the remainder of your profit as dividends.
• National Insurance Savings: Dividends are not subject to National Insurance contributions, which can result in thousands of pounds in savings annually.
• Corporation Tax: The company pays Corporation Tax on its profits (currently 19% for profits up to £50,000), which is often lower than high-bracket personal income tax rates.
• Limited Liability: This structure provides an extra layer of protection for your personal assets should the business face financial difficulties.

The Verdict: For the full-time locum focused on maximizing earnings and building long-term wealth, the limited company is the superior financial move. However, it does require the support of a qualified accountant to manage the increased complexity.

The Bottom Line

The choice comes down to a trade-off between simplicity and profitability.

• Choose Sole Trader if you value a low-maintenance professional life and work part-time.
• Choose Limited Company if you are treating your locuming as a full-time business and want to minimize your tax bill.

Make the Right Decision with the Bronze Membership

Knowing exactly when to make the switch can be difficult as your circumstances change. To help, I have developed a specialized calculator within the bronze membership at theoptomcoach.com.

This tool was designed by a locum, for locums, to help you visualize exactly how much you could save by switching structures. It is a small investment that can save you hours of administrative stress and potentially hundreds of pounds in unnecessary tax.