Locum income is only “high” if you control leakage: tax status, NIC treatment, pension strategy, and IR35 positioning. A £60/hr rate can quietly turn into a mid-£30s/hr net if you default into the wrong structure and lose expense/pension efficiency.
The core decision (UK): sole trader vs limited company
Sole trader is operationally simpler: you invoice, keep profits, pay Income Tax + NIC via Self Assessment.
Limited company can be efficient only when the engagement is genuinely “outside IR35” and you can run salary/dividends + deductible costs + pension contributions cleanly. If the engagement is “inside IR35”, you are broadly taxed like an employee anyway (often with fewer rights), so the Ltd advantage collapses.
IR35 in one sentence (the only sentence that matters)
IR35 (off-payroll working rules) applies when you work via an intermediary (typically your Ltd/PSC) but, if engaged directly, you would have looked like an employee. In that case, tax/NIC is broadly aligned to PAYE employee treatment.
Rate Calculator (illustrative): how £60/hr becomes ~£32/hr with bad planning
Scenario: “Inside IR35” via an umbrella / deemed employment, no pension strategy, no allowable expense planning, and the agency rate is treated as the assignment rate.
£60/hr headline → employer on-costs and umbrella margin are effectively deducted from the assignment rate → taxable pay shrinks before you even hit PAYE.
Then PAYE Income Tax + employee NIC (+ student loan if applicable) applies.
Result: it is entirely plausible to land around ~£32/hr net.
This is why “headline rate” is meaningless without a structure and on-cost model.
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