Tax Guide for Agency Nurses: Tax, Expenses, and IR35

The Accounted Business Team·21 February 2026·7 min read

Working as an Agency Nurse? Your Tax Situation Is More Complex Than You Might Think

Agency nursing is one of the most common forms of temporary and flexible work in the UK. Thousands of nurses work through agencies, filling shifts at NHS hospitals, private clinics, care homes, and GP surgeries. But the tax treatment of agency nurses is not straightforward. Your status — employed, self-employed, or caught by IR35 — determines what you can claim and how you pay tax.

This guide explains the rules for the 2025/26 tax year.

Employment Status: The Fundamental Question

Agency nurses typically fall into one of three categories:

1. Employed by the Agency (PAYE)

Most agency nurses are employed by their agency under an umbrella arrangement or direct employment contract. The agency deducts Income Tax and National Insurance through PAYE before paying you. You receive a payslip, and the agency handles your tax.

If this is your situation, you are an employee. You cannot claim self-employment expenses on a tax return. However, you can claim certain employment expenses if you pay for things your employer does not reimburse (more on this below).

2. Self-Employed (Sole Trader)

Some nurses genuinely operate as self-employed, particularly those who find their own clients, set their own rates, work for multiple organisations simultaneously, and bear their own financial risk. This is less common in nursing than in other professions, and HMRC scrutinises self-employment claims from nurses carefully.

If you are genuinely self-employed, you file a Self Assessment return and claim all allowable business expenses.

3. Working Through a Limited Company (IR35 Applies)

Some agency nurses work through their own personal service company (PSC). This is where IR35 becomes critical.

IR35: What It Means for Agency Nurses

IR35 is the legislation that determines whether a contractor working through a limited company should be taxed as an employee. Since April 2021, in the public sector (including the NHS), the responsibility for determining IR35 status sits with the end client, not the contractor.

IR35 in the NHS

The NHS has taken a blanket approach in many trusts, declaring that all agency nurses working through personal service companies are inside IR35. This means:

The agency or trust deducts Income Tax and National Insurance at source, as if you were an employee
You lose the tax advantages of working through a limited company
The fee-payer (usually the agency) is responsible for making the deductions

If you are inside IR35, the tax savings of a limited company largely disappear. Many nurses in this position have closed their companies and moved to PAYE through the agency or an umbrella company.

Challenging an IR35 Determination

If you believe a blanket IR35 determination is incorrect for your specific engagement, you have the right to challenge it through the client's status disagreement process. However, successfully challenging an NHS trust's determination is difficult, and the process can be slow.

Expenses for PAYE Agency Nurses

If you are employed by an agency and paid through PAYE, your ability to claim expenses is more limited than for self-employed workers. But there are still legitimate claims you can make.

Travel Expenses

This is the biggest potential expense for agency nurses. The rules depend on your workplace pattern:

Temporary workplace rule: If you are sent to a hospital or care home that is a temporary workplace — meaning you are there for less than 24 months and do not expect to be there permanently — your travel costs to and from that workplace are deductible.
Permanent workplace: If you work at the same location continuously and expect to be there for more than 24 months, it becomes a permanent workplace and travel costs are not deductible (they are commuting).

Most agency nurses move between different hospitals and care homes, so the temporary workplace rule usually applies. Claim mileage at 45p per mile for the first 10,000 miles, 25p thereafter, or claim actual travel costs (train fares, bus fares, parking).

Important: If you are paid through an umbrella company that reimburses your travel expenses, you cannot also claim them as a tax deduction. You cannot claim the same expense twice.

Uniform and Clothing

Nurses who must wear a uniform that they wash and maintain themselves can claim flat-rate uniform expenses. HMRC's agreed flat rate for nurses is £185 per year (for 2025/26 — check the current rate as it can change). This covers washing, repairing, and replacing your uniform.

You can claim more than the flat rate if your actual costs are higher, but you need receipts to support the claim.

If your employer provides and launders your uniform, you cannot claim.

Shoes

Nursing shoes and specialist footwear required for work are claimable if you buy them yourself. Keep receipts.

NMC Registration

Your annual Nursing and Midwifery Council (NMC) registration fee is a deductible expense if you pay it yourself. For 2025/26, the annual fee is £120. If your employer pays it, you cannot claim.

NMC registration is listed on HMRC's approved list of professional bodies and learned societies, so this is a straightforward claim.

DBS Checks

If you pay for your own DBS (Disclosure and Barring Service) check, the cost is deductible.

Training and CPD

Mandatory training costs are deductible if you pay for them yourself. This includes:

Basic Life Support (BLS) and Immediate Life Support (ILS) courses
Manual handling training
Infection control courses
Specialist clinical training relevant to your current role

A course that gives you a new qualification to do a different type of work (for example, training to become a nurse prescriber when you are currently a general nurse) may not be deductible as it is a new skill rather than maintaining existing ones. The distinction can be blurry, and in practice, most CPD that helps you do your current job more effectively qualifies.

Professional Indemnity Insurance

If you hold your own professional indemnity or medical malpractice insurance, the premium is deductible.

Stethoscope and Clinical Equipment

If you buy your own stethoscope, fob watch, clinical scissors, pen torch, or other equipment, these are deductible.

How to Claim Employment Expenses

PAYE employees claim expenses by completing form P87 (for claims under £2,500) or by filing a Self Assessment tax return (for claims over £2,500 or if you file a return for other reasons). HMRC will adjust your tax code to give you relief, meaning you pay less tax throughout the year.

For self-employed nurses, expenses are claimed directly on your Self Assessment return as business costs.

National Insurance for Agency Nurses

If you are employed (PAYE), your employer deducts Class 1 National Insurance. If you are self-employed, you pay Class 2 (£3.45 per week) and Class 4 (6% on profits between £12,570 and £50,270, 2% above).

If you have both employed and self-employed income in the same tax year, you may pay NI on both — but there is a maximum annual limit. HMRC will reconcile this after you file your return.

Multiple Agencies, One Tax Position

If you work for several agencies during the tax year, each one operates PAYE independently. They may each give you a portion of your Personal Allowance, or one may use a BR (basic rate) tax code, meaning you overpay or underpay tax during the year. HMRC reconciles this after the tax year and sends you a P800 calculation, or you sort it out through Self Assessment.

Make sure only one employer uses your full Personal Allowance. Contact HMRC to allocate your tax code correctly, or check your Personal Tax Account online.

Record Keeping

Keep records for at least five years:

Payslips from all agencies and umbrella companies
P60s and P45s
Mileage log with dates, locations, and business miles
Receipts for uniform, shoes, equipment, training, NMC registration
Contracts and assignment details showing temporary workplace status

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