Locum Dentist vs Associate: Which Role Suits Your Tax Position?

For UK dentists, the choice between working as a locum or as an associate is not just about daily rates and flexibility. The tax treatment of each role differs in several important ways, affecting your net income, allowable expenses, pension contributions, and exposure to IR35 rules.

This article compares the tax treatment of a locum dentist and an associate for the 2025/26 tax year. We use specific worked examples to show how each role is taxed, what you can claim, and where the risks lie. The facts are drawn from current HMRC rules, NHS pension regulations, and the off-payroll working (IR35) legislation that applies from 6 April 2021.

Tax Status: Self-Employed or Employee?

Associates

Most dental associates in the UK are treated as self-employed for tax purposes. This is the case even when they work under a BDA model associate agreement. HMRC and tax tribunals determine status by looking at the actual working relationship, not the contract. Key tests include control (does the practice principal control when and how you work?), substitution (can you send a replacement?), and financial risk (do you bear the cost of materials or lab fees?).

If the practice exercises significant control over your hours, diary, and treatment plans, HMRC may argue you are an employee. This would mean the practice must deduct PAYE and employer NI. In practice, most associates remain self-employed, but the risk is real and has been tested in tribunals. For a detailed breakdown, see our Associate Tax Survival Guide.

Locum Dentists

Locum dentists are typically self-employed as well. You work on a short-term basis, often at multiple practices, and you control your own schedule. You bear your own indemnity, CPD, and equipment costs. This self-employment status is generally clearer than for associates, because the control and integration tests usually point to independence.

However, many locum dentists operate through a personal service company (PSC). This is where the off-payroll working rules (IR35) become critical. Since 6 April 2021, if the engaging practice is a medium or large client, the practice (not your PSC) decides whether you are inside or outside IR35. If inside IR35, the practice must deduct PAYE and employee NI from the fee paid to your PSC, and also pay employer NI. This can significantly reduce your net income. For more detail, visit our locum dentist tax services page.

Income Tax and National Insurance: A Worked Example

Let us compare two dentists earning £80,000 gross in 2025/26. One works as a self-employed associate, the other as a locum operating through a PSC but outside IR35 (so the PSC receives the full fee). We assume both have no other income and the personal allowance of £12,570 applies.

Associate (Self-Employed)

  • Gross income: £80,000
  • Allowable expenses: £5,000 (indemnity, CPD, lab fees, travel, professional subscriptions)
  • Net profit: £75,000
  • Income tax: Basic rate on £37,700 (£12,571-£50,270) at 20% = £7,540. Higher rate on £24,730 (£50,271-£75,000) at 40% = £9,892. Total tax = £17,432.
  • Class 4 NI: 6% on £37,700 (£12,571-£50,270) = £2,262. 2% on £24,730 (£50,271-£75,000) = £494. Total NI = £2,756.
  • Total tax and NI: £20,188.
  • Net income after tax: £59,812.

Locum (PSC, Outside IR35)

  • Gross fee to PSC: £80,000
  • PSC expenses: £5,000 (indemnity, CPD, travel, accountancy, software)
  • PSC profit before tax: £75,000
  • Corporation tax: 19% on first £50,000 = £9,500. 25% on £25,000 = £6,250. Total CT = £15,750.
  • Profit after CT: £59,250. Assume all taken as dividend.
  • Dividend tax: £500 allowance. Basic rate on £37,700 at 8.75% = £3,299. Higher rate on £21,050 at 33.75% = £7,104. Total dividend tax = £10,403.
  • Total tax (CT + dividend tax): £26,153.
  • Net income after all tax: £48,847.

In this example, the associate keeps £59,812 after tax, while the locum (outside IR35) keeps £48,847. The difference is about £10,965. This is because the locum pays both corporation tax and dividend tax, whereas the associate pays only income tax and Class 4 NI. However, the locum may have more flexibility to retain profits in the company or to split income with a spouse via dividends, which can change the outcome. The key point is that the tax treatment differs materially, and the choice of structure matters.

Allowable Expenses: What Can Each Claim?

Associates

As a self-employed associate, you can claim expenses that are wholly and exclusively for your dental work. Common claims include:

  • Indemnity insurance (MDU, Dental Protection, MDDUS)
  • CPD course fees, travel, and accommodation
  • GDC annual retention fee
  • Professional subscriptions (BDA, local dental committee)
  • Surgery rent (if you pay a fixed fee to the practice)
  • Lab fees and materials (if you bear these costs)
  • Travel between practices (but not ordinary commuting from home to a single practice)
  • Computer, software, and stationery
  • A proportion of home office costs if you do administrative work at home

You cannot claim the cost of your own dental treatment or personal items. For a full list, see our associate tax page.

Locum Dentists

Locum dentists can claim similar expenses, but with some differences. Because you typically work at multiple practices, you can claim travel costs between practices and from home to a practice (if home is your base). You can also claim:

  • Indemnity insurance
  • CPD costs
  • GDC fees
  • Professional subscriptions
  • Equipment and instruments you buy
  • Accountancy fees
  • Insurance (public liability, professional indemnity)
  • If you operate through a PSC, the company can also claim employer pension contributions (which are not a benefit in kind for the director)

If you are inside IR35, your PSC can only claim a limited set of expenses (typically 5% of the fee for administrative costs, plus any allowable travel and subsistence that would be allowed for an employee). This is a significant restriction.

NHS Pension Implications

Associates

Self-employed associates can join the NHS Pension Scheme if they perform NHS work. You must be on a Performers List and hold an NHS contract. Your pensionable earnings are based on the NHS fees you earn, not the private fees. You pay contributions as a percentage of your NHS pensionable earnings (tiered from 5.1% to 13.5% depending on earnings). The practice principal does not make employer contributions for associates; instead, the NHS acts as the employer for pension purposes.

This is a valuable benefit. For a detailed guide, see our NHS Pension Scheme Essentials guide.

Locum Dentists

Locum dentists can also join the NHS Pension Scheme if they perform NHS work. However, the rules are different. Locums are treated as "practitioner" members. You must apply to join and your pensionable earnings are based on the NHS fees you earn. The key difference is that you are responsible for paying both your own contributions and the employer contribution (currently 20.6% for the 2015 scheme). This means you pay a higher total percentage, but you also build up pension benefits at the same rate.

If you work through a PSC, the company can pay the employer contribution, which is an allowable expense for corporation tax purposes. This can be tax-efficient, but you must ensure the payments are made correctly to NHS Pensions.

IR35 and Off-Payroll Working: The Locum Risk

The biggest tax risk for locum dentists operating through a PSC is the off-payroll working rules (IR35). Since 6 April 2021, if the practice engaging you is a medium or large client (as defined by the Companies Act 2006), the practice must decide your IR35 status. If they determine you are inside IR35, they must deduct PAYE and employee NI from the fee paid to your PSC, and also pay employer NI (15% on earnings above £5,000/year in 2025/26).

This can reduce your net income by 20-30% compared to being outside IR35. Many locum dentists have found themselves inside IR35 when working for large corporate dental groups, because those groups are medium or large clients. Small practices (with turnover under £10.2 million, balance sheet under £5.1 million, and fewer than 50 employees) are exempt from the rules, so locums working for small practices are not affected.

If you are a locum dentist, you should review your contracts and working practices carefully. Our page for locum dentists has more information on how to manage IR35 risk.

Which Role Is More Tax-Efficient?

There is no universal answer. It depends on your income level, your expenses, your pension goals, and whether you face IR35.

  • For most associates earning under £100,000, self-employment is straightforward and tax-efficient. You pay income tax and Class 4 NI, but you can claim expenses and join the NHS Pension Scheme with the employer contribution paid by the NHS.
  • For locums outside IR35, a PSC can offer flexibility, especially if you retain profits in the company or split dividends with a spouse. But the combined corporation tax and dividend tax can be higher than self-employment tax.
  • For locums inside IR35, the PSC structure is largely pointless. You would be better off working as a self-employed locum or as an employee, because the tax treatment is similar but with less admin.

If you are considering a change of role, speak to a dental-specialist accountant who can model your specific situation. Our team at Dental Finance Partners can help you compare the numbers. Contact us for a consultation.