Balancing the books

For example, how will the locum optometrist ensure that they can still pay their bills if they go on holiday or are unable to work due to sickness?

How can a self-employed practitioner make sure that they are meeting their tax obligations?

OT spoke with David Davies, of TWD Accountants, about the financial preparations an optometrist should make when switching from an employed role to locum optometry.

Beginning a business

Davies told OT that a common mistake many optometrists make when switching to locum work is to underestimate the obligations that come with becoming self-employed.

“You have to realise that you will be running a business and you need to do that properly,” he said.

Davies highlighted the importance of receiving financial advice from a qualified professional when undertaking some of the more challenging decisions that come with locum work – such as employment status for tax purposes, and whether to practise as a sole trader, limited company or partnership.

You will be running a business and you need to do that properly

He highlighted that the tax advantages for locum optometrists associated with setting up a limited company have diminished over time, and will only benefit locum workers who are earning at a certain level.

There are also more costs and responsibilities associated with establishing a limited company, Davies added.

“If you decide to become a limited company, you must talk to an accountant beforehand. You need to understand whether it will benefit you,” he said.

Davies recommended setting up a separate bank account and credit card for all business expenses and income, and saving at least 25% of all income for the end of year tax bill.

Locum optometrists need to register for self-assessment with HMRC, and set up a book keeping system that allows them to record their income and expenditure accurately.

“It could be anything from a paper-based system to an Excel spreadsheet to a proper accounting package. I would always say that it is good practice to use an electronic format,” he shared.

Davies emphasised that the paper records that support accounts – such as receipts or invoices – need to be kept for six years after the end of the tax year.

Workload planning

Locum optometrist, Rebecca Rushton, shared that when she first started working as a locum, she would take on as many days as she could because she was worried that the work would dry up. However, Rushton said that this approach can lead to burnout.

“Nowadays, I charge appropriately for my time and only work in places I love,” she said.

“It is still a battle balancing work and home life, but it’s definitely more balanced than a few years ago as I aim to have at least two or three days off each week,” Rushton added.

When working in practice, Rushton avoids leaving anything to the next day – such as letters, referrals or other forms.

“I can go home with a clear head and enjoy my evening, starting afresh the next day,” Rushton said.

Her top financial tip for optometrists who are new to locum work is to save a third of what they earn to pay tax.

Locum optometrist, Shamina Asif, shared with OT that she began working as a locum so she could balance the range of work she was doing with her personal life.

When she has more personal commitments, she will book fewer days.

“I think in order to keep organised you really need to put everything into your calendar and think quite far ahead,” Asif shared.

At first, Asif used a paper diary to manage her commitments, but now she uses her phone calendar and web-based platforms.

“This allows me to see the whole year ahead wherever I am. There are a number of apps now used by multiples allowing direct access to calendars so that this appears automatically in the diary when days are booked,” Asif said.

In contrast to working in an employed role where a set amount of money enters an optometrist’s account on a set date, cash flow for a locum optometrist is more varied.

“It is a good idea to have reserve cash in your account until you work out the cash flow. Try and send invoices as soon as is possible, because if you delay this, it will delay money coming into your account,” she said.

Like Rushton, Asif also highlights the importance of saving to pay the end of year tax bill when working as a locum.