Allowable expenses, mileage to home visits, HCPC and indemnity, NIC, VAT and MTD explained for self-employed and locum occupational therapists in the UK.
The tax life of a self-employed occupational therapist is shaped by the road. A community OT might assess a client's bathroom one morning, recommend a stairlift and grab rails, drive across the county to a care home in the afternoon, and write up a medico-legal report at the kitchen table that evening. The fees come from several places, the miles add up fast, and the records that matter most are not glamorous: a mileage log, a list of CPD, and a tidy record of what each clinic or solicitor actually paid you.
This guide is built around how OTs really earn, whether you locum, run a private clinic, take medico-legal instructions, or supplement an NHS post with private work. We cover how your profit is taxed, the deductions specific to this profession, the VAT exemption that catches people out, and what changes when MTD for Income Tax arrives.
As a sole trader you pay Income Tax on profit, which is your total professional income minus allowable expenses. For 2025/26 the personal allowance covers the first GBP 12,570, then you pay 20% to GBP 50,270, 40% to GBP 125,140 and 45% above, with the personal allowance tapering away between GBP 100,000 and GBP 125,140 to create an effective 60% band. Class 4 National Insurance is 6% on profit between GBP 12,570 and GBP 50,270 and 2% above, with Class 2 NIC settled through Self Assessment.
Scottish OTs pay Scottish Income Tax on profit through six bands (19%, 20%, 21%, 42%, 45% and a 48% top rate) and carry an S-prefixed tax code, while National Insurance stays UK-wide. Welsh OTs have a C-coded tax code at rates currently matching the rest of the UK. If you also hold an NHS or council post, your PAYE tax code is doing a lot of work, and a wrong code can mean you over- or under-pay all year. Run it through the tax code checker if the figures look off.
Many occupational therapists are not purely self-employed. A common pattern is a part-time NHS or local-authority post, taxed under PAYE, alongside private assessments, locum sessions or medico-legal reports taxed as self-employment. These are two separate things on your return, and the most frequent mistake is assuming the personal allowance covers both.
If your salaried role already uses your GBP 12,570 allowance, every pound of self-employed profit is taxed from at least the basic rate upward, and a busy private caseload can tip you into the 40% band sooner than expected. Use the multiple-income tax calculator to see how an NHS salary and private fees stack on top of each other, and read our guide to multiple income streams for how to keep them straight.
| Income type | How it is usually taxed | Watch out for |
|---|---|---|
| NHS or council salaried post | Employment income, PAYE at source | Likely uses your personal allowance already |
| Private clinic and home assessments | Self-employment trading income | Record the gross fee, even when paid late |
| Locum and agency sessions | Trading income if engaged self-employed | Check whether the agency operates PAYE on you |
| Medico-legal and expert-witness reports | Trading income | Often standard-rated for VAT, unlike clinical care |
| Training and CPD delivery | Trading income | Usually VATable rather than exempt healthcare |
| Equipment supplied to clients | Trading income; the cost is deductible | Bill the item and claim its cost as an expense |
If you are just beginning to take private work alongside a salaried job, the GBP 1,000 trading allowance is worth knowing. If your gross self-employed income across all freelance work is GBP 1,000 or less in a tax year, it is tax-free and you do not need to register for Self Assessment for it. Cross GBP 1,000 and you must register and report the full amount.
Above the threshold you choose each year between deducting the flat GBP 1,000 allowance instead of expenses, or claiming your actual costs. Most working OTs run real mileage, insurance and registration costs well above GBP 1,000, so they claim actuals. The flat allowance only wins for someone doing a handful of low-cost assessments a year.
An expense is allowable when incurred wholly and exclusively for your practice. For an OT the list is dominated by travel, professional registration and clinical kit rather than office costs.
| Expense | What qualifies | Notes |
|---|---|---|
| Mileage and travel | Visits to client homes, care settings, clinics and assessments | 45p/mile first 10,000 business miles, then 25p; keep a log |
| HCPC registration | Your statutory registration fee | Allowable as a cost of practising |
| Professional membership | RCOT and other relevant bodies | Allowable where relevant to the trade |
| Indemnity insurance | Professional indemnity and public liability | A core, fully deductible cost |
| Assessment tools | Standardised tests, scoring forms, outcome measures, licences | Both purchase and per-use licences |
| Therapy equipment | Splinting materials, perching stools, grab rails and aids supplied for a job | Deduct the cost where you provide the item |
| PPE and clinical consumables | Gloves, aprons, hand sanitiser, infection-control supplies | Allowable for hands-on work |
| Home-office costs | Flat-rate working-from-home, or a fair share of heat, light and broadband | Use the larger fair method |
| Phone and clinical software | Business phone, scheduling, notes and report-writing tools | Exclude the private share |
| CPD and training | Courses that maintain or update your existing registration | Training into a new profession is not allowable |
| DBS checks | Enhanced disclosure needed to practise | Allowable as a cost of trading |
| Accountancy and bank fees | Bookkeeping, Self Assessment, business banking | Fully deductible |
For a community OT, travel is usually the largest deduction by far. Visits to a client's home, a residential setting, a school or a one-off assessment are all business travel, not commuting, so they are allowable. Ordinary commuting to a single fixed base is not.
Most OTs use HMRC's simplified mileage: 45p per mile for the first 10,000 business miles in the year and 25p per mile after that. This flat rate covers fuel, insurance, servicing, repairs and depreciation, so you do not claim those separately on top. Keep a simple log for every journey with the date, the destination and the reason, because HMRC can ask you to support the figure. Alternatively you can claim the actual running costs of the vehicle and split out the private-use share, which can suit someone running a high-cost vehicle, but you must pick one method per vehicle and stick with it.
OTs often buy and provide small items such as grab rails, perching stools, raised toilet seats or splinting materials as part of a recommendation. Where you purchase these to do a job and bill them on, the cost is an allowable expense and the amount you charge the client is income. Larger capital purchases, such as an assessment kit or specialist equipment you keep and reuse, are usually claimed in full through the Annual Investment Allowance.
The private share of dual-use phone, broadband and vehicle costs must be excluded. Everyday clothing is never allowable, even smart clothes for client meetings, though genuinely protective PPE is. Commuting to a fixed base is not travel. And training that qualifies you for an entirely new profession is not allowable, whereas CPD that maintains your existing HCPC registration is.
Take a self-employed occupational therapist doing private home assessments and some medico-legal reports, billing GBP 42,000 of fees for the year and driving 9,000 business miles.
Income: GBP 42,000 (assessments GBP 28,000, medico-legal reports GBP 14,000)
Allowable expenses:
Taxable profit: GBP 42,000 minus GBP 8,650 = GBP 33,350
Income Tax: GBP 33,350 minus GBP 12,570 = GBP 20,780 at 20% = GBP 4,156
Class 4 NIC: GBP 20,780 at 6% = GBP 1,247
Total tax and NIC: GBP 5,403 for the year. Run your own figures through the sole trader tax calculator to sanity-check the numbers, remembering that any NHS salary would sit on top and push more of your profit into higher bands.
For a community OT, the mileage log is worth more than any other piece of paperwork. Record every visit as you make it and a year of driving turns into the single largest deduction on your return.
This is where OTs differ from most trades. Healthcare provided by an HCPC-registered occupational therapist, where the principal purpose is the protection, maintenance or restoration of a person's health, is generally exempt from VAT. Exempt income sits outside the VAT system altogether, so it does not count toward the GBP 90,000 registration threshold.
The catch is that not all OT work is medical care. Medico-legal reports written for litigation, expert-witness work, training delivery, and selling equipment can be standard-rated rather than exempt, and that income does count toward the threshold. If you do a meaningful amount of non-clinical work, track it separately so you know whether your taxable turnover is heading toward GBP 90,000 in any rolling 12-month period. Registering would then let you reclaim VAT on costs, but it also makes your standard-rated services more expensive, so the call depends on who your clients are.
Making Tax Digital for Income Tax Self Assessment replaces the once-a-year return with quarterly digital submissions and a year-end finalisation. The thresholds are based on gross income, not profit:
For an OT this means recording each fee and each business journey digitally as it happens, rather than reconstructing a year of mileage and invoices every January. The quarterly rhythm actually suits a community caseload: capture the visit, the mileage and the fee the same week, and the quarterly summary builds itself. Our guide to MTD for sole traders walks through what the quarterly cadence looks like in practice.
Not keeping a contemporaneous mileage log. Reconstructing thousands of miles months later is error-prone and weak if HMRC asks. Log each journey as you drive it.
Assuming the NHS PAYE allowance covers private work. If a salaried post uses your personal allowance, every pound of self-employed profit is taxed from the basic rate up, so set money aside.
Treating all income as VAT-exempt. Clinical care is usually exempt, but medico-legal reports, training and equipment sales may be standard-rated and count toward the VAT threshold.
Missing the cost of equipment supplied to clients. Items you buy to fulfil a recommendation are deductible; record both the purchase and the amount you billed.
Claiming both mileage and actual vehicle running costs. You pick one method per vehicle. Doubling up is a common and easily spotted error.
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