Three things changed for locum vets this tax year: dividend rates went up on 6 April 2026, Making Tax Digital for Income Tax started for the first tranche of sole traders on the same day, and the income tax thresholds are now frozen to 5 April 2031. Here is what each does to your figures.
Guide · Updated August 2026
Most locum vets ask “should I set up a company?” before they ask what their profit will be, and that is the wrong way round. The company only starts to help once profit is comfortably above what you need to live on, because the saving comes from leaving money in the company rather than from the rates themselves. And in 2026/27 that saving is smaller than it was: dividend rates rose two percentage points on 6 April 2026.
There is one prior question that matters more than either, and it is not about you at all. If the practice engaging you is medium or large, the practice determines your employment status for tax and its fee-payer operates PAYE — so the company structure gets you very little on that engagement. If the practice is small, your own intermediary carries the determination. That split runs through everything below and it is set out properly in our IR35 guide for locum vets.
| Item | 2026/27 |
|---|---|
| Personal allowance | £12,570 |
| Basic rate 20% | Up to £37,700 of taxable income |
| Higher rate 40% | £37,701 to £125,140 |
| Additional rate 45% | Over £125,140 |
| Higher-rate threshold | £50,270 |
These figures apply in England, Wales and Northern Ireland. The personal allowance of £12,570 and the basic rate limit of £37,700 are frozen until 5 April 2031 following Budget 2025, with Finance Bill 2025-26 legislating 2028/29. HMRC's own estimate is that the freeze brings 700,000 more individuals into income tax by 2030/31 than CPI indexation from 2028/29 would have done. For a locum whose day rate rises with the market, that means the share of your income taxed at 40% grows every year even if nothing about your work changes.
| Item | 2026/27 |
|---|---|
| Class 4 main rate, Lower to Upper Profits Limit | 6% |
| Class 4 additional rate, above the Upper Profits Limit | 2% |
| Lower Profits Limit | £12,570 |
| Upper Profits Limit | £50,270 |
| Class 2, voluntary | £3.65 a week |
| Small Profits Threshold | £7,105 |
| Class 3 voluntary | £18.40 a week |
Class 2 is voluntary. Self-employed profits above the Small Profits Threshold of £7,105 give you a National Insurance credit without paying anything. Below that threshold you get no credit, and a full year of voluntary Class 2 costs 52 × £3.65 = £189.80 — which is the cheap way to protect a contribution year if you have had a light year, taken time out, or worked part of the year abroad. Voluntary Class 3, at £18.40 a week, costs 52 × £18.40 = £956.80 for the same year, so establishing that you were self-employed and eligible for Class 2 is worth doing properly.
Illustrative example — a self-employed locum on 2026/27 rates. Turnover £78,000, allowable expenses £12,000, so profit £66,000.
Income tax. Profit £66,000 less the personal allowance of £12,570 leaves taxable income of £53,430. The basic rate band takes £37,700 at 20% = £7,540. The remainder, 53,430 − 37,700 = £15,730, is taxed at 40% = £6,292. Income tax is 7,540 + 6,292 = £13,832.
Class 4. Between the Lower and Upper Profits Limits, 50,270 − 12,570 = £37,700 at 6% = £2,262. Above the Upper Profits Limit, 66,000 − 50,270 = £15,730 at 2% = £314.60. Class 4 is 2,262 + 314.60 = £2,576.60.
Total. 13,832 + 2,576.60 = £16,408.60, leaving 66,000 − 16,408.60 = £49,591.40. That is an effective rate of 16,408.60 ÷ 66,000 = 24.9% on profit, or roughly £1,367 a month to set aside (16,408.60 ÷ 12).
Note which figure drives Making Tax Digital: the £78,000 turnover, not the £66,000 profit. Figures are illustrative and ignore payments on account, student loan and pension relief.
Corporation tax for the financial year beginning 1 April 2026 is unchanged from the structure that has applied since 1 April 2023: 19% on profits of £50,000 or less, 25% on profits over £250,000, and Marginal Relief in between with a standard fraction of 3/200, which produces an effective marginal rate of 26.5% across that band.
The trap for a locum company is the associated companies divisor. Both the £50,000 and the £250,000 limits are divided by one plus the number of associated companies, and reduced proportionately for a short accounting period. Association can arise through substantial commercial interdependence — financial, economic and organisational links — not only through shareholding. If you hold a locum company and, say, a property company, the divisor is 2 and your limits become £25,000 and £125,000. That pulls profit into the marginal band far sooner than most people expect, and it is a common feature of veterinary structures where a practice company, a property company and a personal company sit behind the same people. Our incorporation service works the numbers on your own position.
| Band | From 6 April 2026 |
|---|---|
| Basic rate | 10.75% |
| Higher rate | 35.75% |
| Additional rate | 39.35% |
| Dividend allowance | £500 |
The basic and higher rates each rose two percentage points on 6 April 2026, and that is the single most material change of the year for anyone on a low-salary, dividend-topped profile. Put a number on it: £30,000 of dividends falling in the higher-rate band costs 30,000 × 35.75% = £10,725, which is 30,000 × 2% = £600 more than the same dividends would have cost before 6 April 2026. Repeat that across a few years and the arithmetic that justified incorporating needs redoing rather than assuming.
The Employment Allowance is £10,500 for 2026/27, and the £100,000 secondary Class 1 liability cap was removed from April 2025 so larger employers can now claim it. A one-person locum company generally cannot. HMRC's eligibility condition is explicit: if your company has only one director, they must not be the only employee liable for secondary Class 1 National Insurance. And the allowance is never available for workers within the off-payroll working rules.
That matters because employer National Insurance is 15% above a Secondary Threshold of only £5,000 a year in 2026/27. The old low-salary strategy, built when the threshold was far higher, now generates real employer National Insurance that the Employment Allowance will not usually absorb.
| Qualifying income over | Tested on tax year | Mandatory from |
|---|---|---|
| £50,000 | 2024/25 | 6 April 2026 |
| £30,000 | 2025/26 | 6 April 2027 |
| £20,000 | 2026/27 | 6 April 2028 |
Four points decide whether this is your problem:
Exemptions exist, including for digital exclusion. Our locum vet accounts service covers the quarterly cycle, and the detail of the regime sits in our MTD guide for locum vets.
For a self-employed locum the test is the ordinary one — wholly and exclusively for the purposes of the trade. Clinical equipment you own, professional subscriptions, travel between engagements where your base is not the practice, indemnity cover, and the proportion of home and phone costs genuinely used for the business.
Two points are specific to veterinary work and worth getting right:
The Annual Investment Allowance is £1,000,000 and has been since 1 January 2019. It is available to companies, sole traders and partnerships, covers most plant and machinery, and excludes cars, items owned for another purpose before business use, and gifted items. Second-hand kit qualifies.
Full expensing is companies only. It gives a 100% first-year allowance on main-rate plant and machinery and 50% on special-rate expenditure, uncapped, but the asset must be new and unused, not a car, not gifted and not bought to lease out, with the expenditure incurred on or after 1 April 2023. So an unincorporated locum buying a second-hand ultrasound has the AIA and nothing else, while an incorporated one buying the same machine new has both routes. There is more on this in our capital allowances guide.
Insurance. The RCVS Code requires all your professional activities to be covered by professional indemnity insurance or equivalent arrangements, and it warns locums specifically: the host practice's insurance is likely to cover negligence claims but may not provide any other type of cover, such as representation at an RCVS concerns or disciplinary process. Do not treat the practice's policy as your policy. Our RCVS compliance guide sets out the Code position.
VAT. The registration threshold is £90,000 of taxable turnover in the last 12 months, or expected to be exceeded in the next 30 days, and it has applied since 1 April 2024. A busy locum can cross it. On rate: veterinary services carry VAT at 20%, but be careful how that is stated. It follows from the absence of any relief — the VAT medical exemption in VATA 1994 Schedule 9 Group 7 covers human health professionals, not veterinary surgeons — rather than from a quotable HMRC sentence. The gov.uk page listing VAT rates on different goods and services carries no veterinary entry at all. Medicines are separate and clearly standard-rated: VAT Notice 701/15 paragraph 9.4 says medicines are not covered by the zero rate even where administered in an animal's feed.
What we do with this. We work out the structure question in pounds on your own figures rather than in principle, keep the quarterly Making Tax Digital cycle running so 7 August and 7 November are not events, and tell you the monthly amount to set aside so January is funded. That is our locum vet accounts service. If you are weighing up a company, the incorporation page is the place to start.
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On a profit of £66,000 the illustrative figures are income tax of £13,832 and Class 4 National Insurance of £2,576.60, a total of £16,408.60, leaving £49,591.40. The income tax is the £37,700 basic rate band at 20%, which is £7,540, plus £15,730 at 40%, which is £6,292. The Class 4 is £37,700 between the Lower and Upper Profits Limits at 6%, which is £2,262, plus £15,730 above the Upper Profits Limit at 2%, which is £314.60. That is an effective 24.9% on profit, or about £1,367 a month to set aside. The figures ignore payments on account, student loan and pension relief.
It applies to self-employed locums, not to those working through a limited company. The first tranche started on 6 April 2026 for anyone with qualifying income over £50,000, tested on the 2024/25 Self Assessment return, and around 780,000 individuals are in it. The £30,000 threshold follows from 6 April 2027 and £20,000 from 6 April 2028. The critical point is that qualifying income is gross income from self-employment and property before allowances or expenses, so it is your turnover rather than your profit. Quarterly updates are cumulative from 6 April and due on 7 August, 7 November, 7 February and 7 May. Exemptions exist, including for digital exclusion.
Usually not. The Employment Allowance is £10,500 for 2026/27, but HMRC's eligibility condition says that if your company has only one director, that director must not be the only employee liable for secondary Class 1 National Insurance. A single-director, single-employee locum company therefore falls outside it. The allowance is also never available in respect of workers within the off-payroll working rules. That matters more than it used to, because employer National Insurance is 15% on earnings above a Secondary Threshold of just £5,000 a year, so a low-salary strategy now generates real employer National Insurance with no allowance to absorb it.
Yes, by two different routes depending on how you work. A self-employed locum deducts it as an ordinary business expense: £431 for 2026-27, due on or before 30 April 2026, rising to £468 if paid between 1 and 31 May, with removal from the Register if it is unpaid by 31 May. An employed veterinary surgeon relies instead on section 343(2) of ITEPA 2003, which makes deductible a fee for entry or retention of a name in the register of veterinary surgeons and the supplementary veterinary register. Note that HMRC's manual names the registers rather than any professional association, so do not assume association subscriptions are covered.
Dividend rates rose by two percentage points on the basic and higher rates from 6 April 2026, to 10.75% basic, 35.75% higher and 39.35% additional, with the dividend allowance still £500. On £30,000 of dividends falling in the higher-rate band that is 30,000 at 35.75%, which is £10,725, some £600 more than the same dividends cost before the change. The rise does not by itself make a company the wrong answer, but it does mean any calculation done a couple of years ago needs redoing. Corporation tax itself is unchanged: 19% up to £50,000, 25% above £250,000, with Marginal Relief in between and both limits divided by one plus the number of associated companies.
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