Do locum solicitors need to register for VAT?

Yes, if your taxable turnover from all locum assignments exceeds £90,000 in a rolling 12-month period. This applies whether you operate as a sole trader or through a limited company. Once registered, you must charge 20% VAT on your fees and submit VAT returns to HMRC. If you are not VAT-registered, you cannot charge VAT, and the engaging firm cannot reclaim any VAT on your fees.

Can a locum solicitor be inside IR35?

Yes. IR35 applies if the locum solicitor works through a limited company and would have been an employee if engaged directly. The engaging firm (if medium or large) must decide the IR35 status of the contract. Factors include control, substitution rights, and mutuality of obligation. A locum solicitor who is told when and how to work, cannot send a substitute, and has an ongoing obligation to accept work is likely inside IR35.

What is the difference between a locum solicitor being self-employed and a disguised employee?

A genuinely self-employed locum solicitor controls their own work schedule, can send a substitute, bears financial risk, and has no ongoing obligation to accept further assignments. A disguised employee is treated as self-employed on paper but works under the same conditions as an employee: the firm controls their work, they cannot send a substitute, and they have a continuing obligation to accept work. HMRC and tribunals look at the reality of the working relationship, not the contract terms alone.

Should a locum solicitor operate as a sole trader or a limited company?

It depends on your income level, IR35 status, and administrative preferences. A sole trader structure is simpler: you invoice the firm, pay Class 4 NI, and file a self-assessment return. A limited company can be more tax-efficient if most contracts are outside IR35, because you can take profits as dividends. However, a limited company adds administrative burden and corporation tax. If most contracts are inside IR35, a sole trader structure may be simpler and avoid the double tax layer.

Locum Solicitor Tax

How Does IR35 Apply to a Locum Solicitor in 2025/26?

18 May 2026•Accounts for Lawyers Editorial Team•8 min read

A clear guide for locum solicitors and the firms that engage them, covering IR35 status, VAT registration thresholds, and the practical tax implications of working as a self-employed solicitor or through a personal service company.

Why Locum Solicitor Tax Matters More Than Ever

The way a locum solicitor is taxed depends on their engagement structure, not their job title. HMRC and the SRA both take an interest in how locum solicitors are paid, whether they are genuinely self-employed, and whether the correct tax has been deducted at source.

For the 2025/26 tax year, the key questions are: Does IR35 apply to your contract? Do you need to charge VAT? And are you genuinely self-employed for tax purposes? This article answers those questions for locum solicitors and the firms that engage them.

What Is a Locum Solicitor for Tax Purposes?

A locum solicitor is a qualified solicitor who works on a temporary or fixed-term basis, typically covering absences, caseload peaks, or specialist work. For tax purposes, HMRC looks at the substance of the working relationship, not the label.

If you are a locum solicitor working through your own limited company (a personal service company, or PSC), HMRC applies the IR35 rules to determine whether you should be treated as an employee for tax purposes. If you are a locum solicitor working as a sole trader, HMRC looks at the same factors to decide if you are genuinely self-employed or a disguised employee.

IR35 and the Locum Solicitor

IR35 is the off-payroll working legislation. It applies when a locum solicitor provides services through an intermediary (usually a limited company) but would have been an employee if they were engaged directly. The rules shifted responsibility to the end client for medium and large organisations from April 2021. Most law firms are medium or large under the Companies Act definitions, so the firm must decide the IR35 status of the contract.

If the firm determines the contract is inside IR35, it must deduct PAYE and employer National Insurance from the fees paid to the locum's limited company. The locum's company then receives the net amount as deemed employment income. If the contract is outside IR35, the locum's company invoices the firm gross, and the locum manages their own tax via salary, dividends, and corporation tax.

HMRC uses three key tests to assess IR35 status: control, substitution, and mutuality of obligation. A locum solicitor who is told when, where, and how to work, cannot send a substitute, and has a continuing obligation to accept work is likely to be inside IR35. A locum solicitor who sets their own hours, can send a qualified substitute, and has no ongoing obligation to accept further assignments is likely to be outside IR35.

Locum Self-Employed Status: Sole Trader vs Limited Company

Many locum solicitors operate as sole traders. This is simpler: you invoice the firm, pay Class 2 and Class 4 National Insurance on your profits, and file a self-assessment tax return. You do not have a separate legal entity. The firm does not deduct tax at source, but it must still check your self-employed status is genuine.

Operating through a limited company offers potential tax advantages: you can pay yourself a small salary and take the rest as dividends, which attract lower tax rates than employment income. But the company must pay corporation tax on its profits, and you must comply with Companies House filing requirements. The IR35 risk is higher because HMRC specifically targets PSC structures.

For a locum solicitor, the choice between sole trader and limited company depends on your expected income level, your appetite for administrative burden, and the IR35 status of your contracts. If most of your contracts are outside IR35, a limited company can be tax-efficient. If most are inside IR35, a sole trader structure may be simpler and avoid the double tax layer of corporation tax plus dividend tax.

Locum VAT: When Must You Register?

A locum solicitor must register for VAT if their taxable turnover exceeds the VAT threshold, which is £90,000 for 2025/26. This applies to the total fees you charge for your legal services, whether you are a sole trader or a limited company. If you work through a limited company, the company's turnover is the relevant figure, not your personal income.

If you are a sole trader locum solicitor, your VAT registration threshold is based on your total fee income from all clients in a rolling 12-month period. Once you exceed £90,000, you must register within 30 days. You then charge 20% VAT on your invoices, which you must account for to HMRC via VAT returns.

Some locum solicitors mistakenly think they can avoid VAT by keeping each contract below the threshold. That is not correct. The threshold applies to your total turnover from all sources, not per contract. If you have multiple assignments that together exceed £90,000, you must register.

If you are a locum solicitor working through a limited company, the company's turnover is the measure. The same threshold applies. Many locum solicitors operating through PSCs find themselves VAT-registered because their company's turnover exceeds £90,000. You can register for the Flat Rate Scheme if eligible, which simplifies VAT accounting, but the scheme has restrictions for limited cost businesses.

VAT on Locum Solicitor Fees: Who Pays?

When a locum solicitor is VAT-registered, the firm paying the locum's fees can recover the VAT as input tax, provided the firm is itself VAT-registered and the fees relate to its taxable supplies. Most law firms are VAT-registered because they charge VAT on their own legal services. So the VAT cost is neutral for the firm: it reclaims the VAT from HMRC.

The locum solicitor must issue VAT invoices showing their VAT registration number, the net fee, the VAT amount, and the total. If the locum is not VAT-registered, they cannot charge VAT, and the firm cannot reclaim any VAT on the fees.

One common question: does a locum solicitor need to charge VAT on disbursements? The answer depends on whether the disbursement is a true disbursement (paid on behalf of the client) or a recharged expense. True disbursements, such as court fees or search fees paid directly to a third party, are outside the scope of VAT. Recharged expenses, such as travel costs or printing, are part of the locum's supply and subject to VAT if the locum is registered.

Practical Compliance for Locum Solicitors

Keeping Records

Whether you are a sole trader or a limited company, you must keep accurate records of your income and expenses. HMRC expects you to retain invoices, bank statements, and receipts for at least five years after the 31 January following the tax year. For a locum solicitor, this means keeping records for each assignment, including the contract, timesheets, and invoices.

If you operate through a limited company, you must also maintain statutory records: director's minutes, share register, and annual accounts filed at Companies House. The company's accounting period is usually 12 months, and corporation tax is due nine months and one day after the end of the period.

National Insurance for Locum Solicitors

If you are a sole trader locum solicitor, you pay Class 4 National Insurance at 6% on profits between £12,570 and £50,270, and 2% on profits above £50,270. Class 2 National Insurance was abolished from April 2024, so you no longer pay a flat weekly amount. You still need to pay Class 4 via your self-assessment tax return.

If you operate through a limited company and your contracts are outside IR35, you pay yourself a salary (subject to PAYE and employer/employee NI) and dividends (subject to dividend tax). The salary must be at least the National Living Wage for the hours worked, but many locum solicitors take a salary of around £12,570 to use their personal allowance, with the rest as dividends.

If your contracts are inside IR35, the firm deducts PAYE and employer NI from the fees paid to your company. Your company then pays you the net amount as deemed employment income. You cannot take dividends from that income because it is treated as employment income, not company profits.

Pension Contributions

As a self-employed locum solicitor, you are responsible for your own pension provision. You can make personal pension contributions and receive tax relief at your marginal rate. If you operate through a limited company, the company can make employer pension contributions, which are deductible against corporation tax. This can be a tax-efficient way to extract profits from the company without triggering dividend tax or NI.

If your contracts are inside IR35, the deemed employment income is treated as earnings for pension purposes. You can make personal contributions based on that income, but the firm is not required to make employer pension contributions unless the contract specifies them.

Common Mistakes Locum Solicitors Make

Assuming all locum work is outside IR35. HMRC has won several tribunal cases against locum professionals, including solicitors, where the reality of control and substitution showed an employment relationship. Do not rely on a contract clause alone. The working practice matters.
Failing to register for VAT on time. If your turnover exceeds £90,000 and you do not register, HMRC can charge you the VAT you should have collected plus penalties. Backdate registration is possible but messy.
Mixing personal and business expenses. If you operate through a limited company, keep a separate business bank account. HMRC will disallow expenses that are not wholly and exclusively for the trade.
Ignoring the SRA Accounts Rules. A locum solicitor handling client money must comply with the SRA Accounts Rules, even if working temporarily. This includes maintaining a client account, proper record-keeping, and reconciliation every five weeks. The firm engaging you is ultimately responsible, but you share the liability.
Not taking professional indemnity insurance. Every SRA-regulated firm must hold PII to the Minimum Terms and Conditions. If you are a locum solicitor working through your own company, you may need your own PII policy if the engaging firm's policy does not cover you. Check before you start.

How a Specialist Accountant Helps

The tax rules for locum solicitors are not simple. IR35, VAT, and self-employment status interact in ways that can catch out the unwary. A specialist solicitor accountant can review your contracts, advise on the best structure for your circumstances, and ensure you comply with HMRC and SRA requirements.

At Accounts for Lawyers, we work exclusively with solicitors and law firms. We understand the specific tax and regulatory issues that locum solicitors face. If you are a locum solicitor unsure about your IR35 status, VAT registration, or the best way to structure your practice, contact us for a no-obligation discussion.

For more guidance on related topics, see our guides on SRA Accounts Rules essentials and COFA fundamentals. If you are a firm engaging locum solicitors, our COFA compliance support service can help you manage the risks.

This article provides general guidance only. Tax rules change, and individual circumstances vary. Always seek advice from a qualified accountant specialising in the legal sector.

Frequently asked questions

Do locum solicitors need to register for VAT?: Yes, if your taxable turnover from all locum assignments exceeds £90,000 in a rolling 12-month period. This applies whether you operate as a sole trader or through a limited company. Once registered, you must charge 20% VAT on your fees and submit VAT returns to HMRC. If you are not VAT-registered, you cannot charge VAT, and the engaging firm cannot reclaim any VAT on your fees.
Can a locum solicitor be inside IR35?: Yes. IR35 applies if the locum solicitor works through a limited company and would have been an employee if engaged directly. The engaging firm (if medium or large) must decide the IR35 status of the contract. Factors include control, substitution rights, and mutuality of obligation. A locum solicitor who is told when and how to work, cannot send a substitute, and has an ongoing obligation to accept work is likely inside IR35.
What is the difference between a locum solicitor being self-employed and a disguised employee?: A genuinely self-employed locum solicitor controls their own work schedule, can send a substitute, bears financial risk, and has no ongoing obligation to accept further assignments. A disguised employee is treated as self-employed on paper but works under the same conditions as an employee: the firm controls their work, they cannot send a substitute, and they have a continuing obligation to accept work. HMRC and tribunals look at the reality of the working relationship, not the contract terms alone.
Should a locum solicitor operate as a sole trader or a limited company?: It depends on your income level, IR35 status, and administrative preferences. A sole trader structure is simpler: you invoice the firm, pay Class 4 NI, and file a self-assessment return. A limited company can be more tax-efficient if most contracts are outside IR35, because you can take profits as dividends. However, a limited company adds administrative burden and corporation tax. If most contracts are inside IR35, a sole trader structure may be simpler and avoid the double tax layer.

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