Introduction

IR35 rules, set by Her Majesty's Revenue and Customs (HMRC), are crucial for locum dental professionals—dentists, hygienists, and dental nurses alike. These rules determine how self-employed workers, particularly those operating through intermediaries like Personal Service Companies (PSCs), are taxed. For locums, understanding IR35 is essential for accurately calculating your tax liabilities, maintaining compliance, and avoiding potentially significant penalties.

Whether you're new to the world of locum work or a seasoned pro seeking clarity on the latest regulations, this guide will break down everything you need to know about IR35 and its impact on dental locums. We'll provide actionable advice to help you stay compliant in 2025 and beyond.

What Are IR35 Regulations?

Introduced by HMRC, IR35 is a tax legislation designed to prevent ‘disguised employment’—where a contractor works as a self-employed individual but functions similarly to an employee. The key distinction IR35 makes is whether a contractor is truly independent or should be classified as an employee for tax purposes.

For locum dental professionals, IR35 applies when you work via a limited company (Personal Service Company—PSC) or through an agency. If deemed ‘inside IR35,’ you are considered an employee for tax purposes and will be subject to PAYE tax and National Insurance (NI) deductions, potentially reducing your take-home pay.

How IR35 Affects Locum Dental Professionals

Locum dentists often work in different contractual setups, and IR35 status can vary depending on your working arrangements. Here’s how it may impact you:

• Inside IR35: You are considered an employee for tax purposes, meaning you pay PAYE tax and NI contributions like a permanent staff member. However, you do not receive employee benefits such as sick pay or holiday entitlement.
• Outside IR35: You operate as a truly independent contractor, allowing you to pay corporation tax and manage your income in a tax-efficient way. However, you must prove your independent status to HMRC.

Key Factors That Determine IR35 Status

HMRC considers three main tests when assessing IR35 status:

1. Control – Does the dental practice control how, when, and where you work? If so, you may fall inside IR35.
2. Substitution - Can you send a qualified substitute in your place? A genuine substitution clause can help place you outside IR35.
3. Mutuality of Obligation (MOO) – Does the practice expect you to accept ongoing work, and are they obliged to provide it? If yes, you may be classed as an employee.

Checking Your IR35 Status

To check your status, you can use HMRC’s Check Employment Status for Tax (CEST) tool. However, this tool has been criticised for its lack of accuracy, so seeking professional advice from an accountant or tax specialist is advisable. Misclassification can lead to penalties, so it’s essential to assess your contracts carefully.

Strategies to Stay Compliant and Minimise Risks

Navigating IR35 can be complex, but with the right approach, you can remain compliant while maximising your earnings:

• Review Your Contracts – Ensure contracts clearly outline your independent status, including control over work, substitution rights, and no mutual obligation.
• Consider an Umbrella Company – If inside IR35, working through an umbrella company can simplify tax obligations and provide some employment benefits.
• Negotiate Terms with Practices – Discuss your working arrangements to ensure you are classified correctly and fairly compensated.

Penalties for Non-Compliance

Failing to comply with IR35 regulations can lead to significant penalties, including backdated tax payments and fines. It’s essential to ensure that your contracts and working arrangements accurately reflect your employment status.

Financial Planning and Tax Considerations

If you fall inside IR35, tax planning becomes even more important. You may need to adjust your budget to account for higher tax deductions. Here are some financial tips:

• Claim Allowable Expenses – Even inside IR35, you can claim expenses such as professional indemnity insurance and CPD training.
• Set Up a Pension Scheme – Contributions to a private pension scheme can help offset tax liabilities.
• Keep Accurate Records – Maintain detailed records of income, expenses, and contracts to support your tax position in case of an HMRC audit.

The Future of IR35 and What to Expect

The UK government has made several amendments to IR35 in recent years, and further changes may occur. It’s essential to stay updated through reliable sources such as HMRC and professional organisations like the British Dental Association (BDA).

Conclusion

IR35 is a significant factor for locum dental professionals, affecting everything from tax payments to contract negotiations. Understanding whether you fall inside or outside IR35 is key to making informed career decisions. By reviewing contracts, seeking professional advice, and staying informed about legal updates, you can navigate IR35 effectively while maintaining career flexibility.

Find Your Next Dental Opportunity with Us!

Looking for flexible locum dental shifts or permanent roles? At Verovian Dental Agency we specialise in connecting dental professionals with top opportunities in the field. Whether you’re a locum dentist, hygienist, or dental nurse, we can help you find the right position that suits your skills and preferences.

Contact us today to explore available positions and let us match you with the perfect role. Your next job is just a click away!