The community pharmacy CPCF settlement 2026/27 is now a live financial planning issue for pharmacy owners across England. The new Community Pharmacy Contractual Framework has been confirmed, with total funding rising to £3.636 billion, the Single Activity Fee increasing to £1.52 from May 2026 activity, retained medicine margin increasing to £1.1 billion, and independent prescribing being introduced from autumn 2026.
For pharmacy owners, the headline funding increase is only part of the story. The real issue is how these changes affect NHSBSA reconciliations, management accounts, VAT partial exemption, payroll costs, MTD for Income Tax records, supplier payments and cash flow planning.
This guide explains what changed from the 2025/26 baseline and what your pharmacy should do now, using the official GOV.UK 2026/27 CPCF guidance as the reference point.
The 2025/26 Settlement: What Your Baseline Funding Consisted Of
To understand where your pharmacy stands now, you first need to understand what the 2025/26 CPCF provided. This was the framework that governed your income from April 2025 and was rolled forward into the early part of 2026/27 while negotiations continued.
The 2025/26 settlement was announced on 31 March 2025 and covered both 2024/25 and 2025/26 in a single two-year agreement. The settlement took baseline annual CPCF funding for 2025/26 to £3.073 billion and secured a further £215 million to support the continuation of Pharmacy First and other Primary Care Recovery Plan services.
It also secured a write-off of £193 million of historic margin over-delivery. This was important because it removed a clawback pressure that had been sitting over the sector and improved the forward cash flow position for community pharmacies.
Funding guaranteed to the sector through the CPCF rose to £3.073 billion in 2025/26. This represented a major increase compared with previous years, although it did not fully close the gap between the cost of delivering NHS pharmacy services and the income available through the contract.
The specific income components that made up the 2025/26 baseline were as follows.
Single Activity Fee: £1.46 per item
The Single Activity Fee increased from £1.27 to £1.46 from April 2025. This 19p increase formed the core uplift to dispensing income for every pharmacy in England.
At an average dispensing volume of 8,000 items per month, the SAF at £1.46 generated £11,680 per month, or approximately £140,160 per year, before taking account of volume changes, retained margin, clinical service income or local service income.
For pharmacy owners, this remained one of the most important figures in management accounts because it directly affects monthly NHS dispensing income and NHSBSA payment schedule reconciliation.
Margin Allowance: £900 Million Sector-Wide
The medicine margin allowance for community pharmacy rose to £900 million per year from 1 April 2025. This was an increase of £100 million from the previous £800 million allowance.
The margin allowance is not a direct fee. It is built into Category M Drug Tariff pricing and represents the retained purchasing margin pharmacies earn by buying medicines below the reimbursement price.
Because it does not appear as a clear monthly line item on your NHSBSA payment schedule, retained margin needs to be monitored through purchasing data, reimbursement data and gross profit analysis. This is one reason why pharmacy owners should review management accounts regularly rather than only relying on year-end accounts.
Pharmacy First: £17 Consultation Fee and Monthly Fixed Payments
The fee for Pharmacy First minor illness and clinical pathway consultations increased from £15 to £17 from April 2025.
Pharmacy First income includes consultation fees and, where the pharmacy meets the relevant requirements, a monthly fixed payment. The fixed payment is not automatic. Current arrangements provide £500 for pharmacies delivering 20–29 eligible clinical pathway consultations in a month and £1,000 for those delivering 30 or more, subject to the service and bundling requirements applying at the time.
For pharmacy owners, Pharmacy First income should be tracked separately from dispensing income. It has different claim patterns, different operational costs, and different performance risks. If your claims, consultation volumes and staff time are not reviewed properly, it can be difficult to see whether the service is genuinely profitable.
You can read more about service income treatment in our guide to Pharmacy First income.
Pharmacy Contraception Service: £25 Per Consultation
The Pharmacy Contraception Service fee for initiation and continuation consultations increased from £18 to £25 from April 2025.
For pharmacies with active PCS provision, this created a more meaningful clinical service income stream. However, the income should still be reviewed against pharmacist time, training, room availability, claim completion, and the impact on dispensing workflow.
New Medicine Service: Antidepressants Added
The 2025/26 settlement also expanded the New Medicine Service by adding antidepressants to the eligible therapy areas.
This increased the potential patient population for NMS and created an additional income opportunity for pharmacies with strong service processes. However, as with Pharmacy First and PCS, NMS should be monitored separately in your accounts so you can see the value of service income compared with the time and staffing cost needed to deliver it.
Emergency Hormonal Contraception Added to the Contraception Service
Emergency Hormonal Contraception was added to the Community Pharmacy Contraception Service from October 2025.
This brought EHC into the nationally commissioned service structure and created another service income stream for commissioned pharmacies. The accounting treatment should be kept separate from retail sales, private services and dispensing income to avoid confusion in VAT reviews and service profitability reporting.
Historic Margin Overspend Written Off: £193 Million
The Government agreed to write off £193 million of historic medicines margin over-delivery, much of which had built up during the pandemic period.
This did not create a direct cash payment to individual pharmacies. Instead, it removed a liability that would otherwise have been recovered through future Drug Tariff reductions. For pharmacy owners, the practical benefit was a stronger forward cash flow position than would have existed if the over-delivery had been clawed back.
Accounting Point: 2025/26 Baseline
If your pharmacy operated during April 2026 under rolled-forward 2025/26 rates while the 2026/27 settlement was being finalised, your management accounts for that period should reflect the 2025/26 fee structure.
That means SAF at £1.46 for April 2026 activity, Pharmacy First consultation fees at £17, PCS at £25, and retained margin monitored through your usual purchasing and reimbursement analysis.
Our pharmacy accounting team is reviewing transition-period management accounts for pharmacy clients to make sure April, May and June 2026 income is correctly matched to the right activity period and payment schedule.
Why the 2025/26 Settlement Was Not Enough
The 2025/26 settlement was the first significant investment in community pharmacy core funding for many years, but it did not remove the financial pressure on contractors.
For many pharmacy owners, the 2025/26 baseline still meant cross-subsidy. Private services, OTC retail, private prescriptions and retained purchasing margin continued to support the cost of delivering NHS dispensing and clinical services.
The main challenge was that the cost of operating a compliant, accessible community pharmacy continued to rise. Staffing costs, locum costs, rent, utilities, insurance, software, compliance, wholesaler terms and working capital pressure all remained significant.
The employment cost pressure has also increased. Employer NIC remains at 15% above the £5,000 secondary threshold, while the National Living Wage increased to £12.71 per hour from 1 April 2026 for workers aged 21 and over. For many pharmacies, this means the CPCF uplift needs to be reviewed alongside payroll, rota planning, locum cover, opening hours and service delivery costs.
As explained in our employer NIC changes guide, even a modest increase in payroll cost can materially affect pharmacy cash flow if income is not reconciled and claimed accurately.
The 2026/27 Settlement: What Has Changed
The 2026/27 CPCF was agreed and published on 29 May 2026. The settlement gives community pharmacy owners more certainty, but it also creates a transition period that needs careful financial handling.
Here are the key changes and what each one means for your pharmacy accounts.
Total Funding: £3.636 Billion
Community pharmacy funding for 2026/27 has increased to £3.636 billion. This represents a 10.3% increase and is the headline figure in the new settlement.
However, pharmacy owners should not rely only on the sector-wide figure. What matters for your own pharmacy is how the funding flows through dispensing volume, SAF, retained margin, Pharmacy First, contraception services, independent prescribing, PQS, local services and private income.
A pharmacy with high dispensing volume but low clinical service activity will see a different income pattern from a pharmacy that is heavily focused on Pharmacy First, contraception and future independent prescribing.
Single Activity Fee: £1.52 From May 2026 Activity
The Single Activity Fee increases from £1.46 to £1.52 per item. The increase applies to activity delivered from May 2026 onwards.
This is one of the most important practical points in the whole settlement.
April 2026 activity should be treated at the 2025/26 rolled-forward SAF rate of £1.46. May 2026 activity onwards should be treated at the confirmed 2026/27 SAF rate of £1.52.
At 8,000 items per month, the 6p increase generates an additional £480 per month, or £5,760 per year, before allowing for any volume changes.
This is a useful uplift, but it is not enough on its own to fix pharmacy profitability. The benefit needs to be reviewed alongside payroll increases, locum costs, margin performance, supplier terms and service income.
Accounting Point: SAF Rate Boundary
The SAF increase applies from May 2026 activity, not April 2026 activity. Your April income should not be restated to £1.52 unless specific later guidance changes that position.
Your NHSBSA reconciliation should clearly identify:
April 2026 activity at £1.46 per item
May 2026 activity at £1.52 per item
June 2026 onwards at £1.52 per item, subject to future contract updates
Any May management accounts prepared using the old £1.46 rate should be adjusted. For example, a pharmacy dispensing 8,000 items in May would need an additional income accrual of £480.
This is exactly the type of transition issue that should be picked up through monthly pharmacy NHS dispensing income, clawbacks and reconciliations.
Margin Allowance: Increased to £1.1 Billion
The retained medicine margin allowance increases by £200 million to £1.1 billion sector-wide.
This is a 22% increase compared with the 2025/26 margin allowance of £900 million. For individual pharmacies, the benefit will depend on purchasing efficiency, wholesaler terms, product mix, Category M movements and dispensing profile.
The important point is that this does not appear as one clear monthly payment. It flows through reimbursement and purchasing margin over time.
For that reason, pharmacy owners should not treat the £200 million sector-wide increase as a simple cash injection. It needs to be monitored through gross profit percentage, purchase ledger data, Drug Tariff movements and stock control.
Historic Over-Delivery Written Off: Up to £239 Million
The 2026/27 settlement also writes off up to £239 million of net contract funding over-delivery accrued up to March 2026.
This builds on the £193 million write-off secured in the previous settlement. Together, these write-offs represent a major improvement to the sector’s forward funding position because historic over-delivery will not be recovered in the way contractors may have feared.
Again, this does not mean your pharmacy receives a direct cash payment. The benefit is that future funding is not reduced to claw back that historic over-delivery.
Pharmacy First Budget Merged Into Core CPCF
The Pharmacy First budget, which supports Pharmacy First, the Pharmacy Contraception Service and the Hypertension Case-Finding Service, is being combined with the core CPCF sum.
This is a structural change rather than a simple fee increase.
For contractors, the key benefit is that funding is committed to the sector more securely. It reduces the concern that unused Pharmacy First budget could be treated separately and potentially clawed back at sector level.
For individual pharmacy owners, the commercial message is still the same: claim accurately, deliver eligible consultations, monitor service performance, and make sure the staff time required to deliver the service is properly reflected in management accounts.
Independent Prescribing in Community Pharmacy: New Income Stream From Autumn 2026
NHS-funded independent prescribing will be introduced into community pharmacy from autumn 2026 as an optional extension of Pharmacy First and the Pharmacy Contraception Service.
This is one of the most important service developments in the 2026/27 settlement, but the payment structure needs to be understood correctly.
The £525 amount is not a per-consultation fee.
Pharmacies taking part will receive a one-off £500 setup payment once they have signed up, confirmed their go-live date, and have the required NHS-assured Electronic Prescribing Service arrangements in place.
They will also receive a £525 monthly infrastructure payment, in addition to the usual Pharmacy First or Pharmacy Contraception Service consultation fees.
This means independent prescribing should be treated as a new service income category in your accounts, but the £525 should not be forecast as a payment for each consultation. The monthly infrastructure payment supports the fixed cost of being ready to deliver the service, while consultation fees should be recognised separately when eligible consultations are completed and claimed.
Accounting Point: Independent Prescribing Income
Set up separate nominal codes for:
IP setup payment income
IP monthly infrastructure income
IP-related Pharmacy First consultation income
IP-related contraception consultation income
Associated staffing, training and software costs
Do not combine IP income with standard Pharmacy First income, NHS dispensing income or private clinical services.
Keeping the income streams separate will make it easier to review profitability, monitor VAT partial exemption, assess staffing cost, and prepare future management accounts.
What the 2026/27 Deal Does Not Resolve
The 2026/27 settlement gives the sector more certainty, but it does not remove every financial pressure facing community pharmacies.
The economics of NHS dispensing remain challenging. Pharmacies still need to manage rising payroll costs, supplier terms, locum costs, rent, utilities, funding delays, NHSBSA timing differences and cash flow pressure.
The 10.3% uplift should help, but the benefit will vary from pharmacy to pharmacy. A contractor with strong service delivery, tight purchasing controls and accurate monthly reconciliations may feel the uplift more clearly than a contractor with low service activity, weak stock control and irregular bookkeeping.
This is why pharmacy owners should not simply update one income line and move on. The whole 2026/27 budget needs to be rebuilt.
The Financial Management Actions for Pharmacy Owners Right Now
Now that the 2026/27 settlement has been confirmed, pharmacy owners should take the following actions.
Update Your NHSBSA Payment Schedule Reconciliation
The SAF rate change creates a clear transition point. April 2026 activity should be reconciled at £1.46 per item, while May 2026 activity onwards should be reconciled at £1.52 per item.
This should be reviewed carefully against your NHSBSA schedules. Any difference between expected income and actual payment should be investigated quickly.
The transition period is a common place for errors because activity months and payment months do not always feel aligned. Your accounts should follow the activity period, not simply the month the cash lands in the bank.
Rebuild Your 2026/27 Income Budget
Any provisional budget prepared before the settlement should now be replaced with confirmed figures.
Your updated pharmacy income budget should include:
SAF at £1.46 for April 2026 activity
SAF at £1.52 from May 2026 activity onwards
Retained medicine margin based on the £1.1 billion sector-wide allowance
Pharmacy First consultation income at current service rates
Pharmacy First fixed payments where thresholds are met
Pharmacy Contraception Service income
Hypertension Case-Finding Service income
PQS income where applicable
Independent prescribing setup and infrastructure income from the service launch period
Private service income
OTC and retail income
This budget should then be compared against staffing, rent, utilities, software, insurance, locum cover, finance costs and supplier payment terms.
Set Up Separate Nominal Codes for IP Income
If your pharmacy has a qualified independent prescriber or plans to deliver IP services, set up the nominal structure before the service launches.
At minimum, you should separate the setup payment, monthly infrastructure payment and consultation income.
This avoids confusion later and gives a cleaner view of whether the service is profitable after allowing for pharmacist time, training, consultation room use, software, admin and claim processing.
Update Your MTD for Income Tax Records
If you are within the MTD for Income Tax mandate, your first 2026/27 quarterly update for the period 6 April to 5 July 2026 is due by 7 August 2026.
Your digital records should reflect April 2026 income at the rolled-forward 2025/26 rates and May and June 2026 dispensing activity using the confirmed £1.52 SAF rate.
This is not just a tax admin point. If your bookkeeping records are wrong at the quarterly update stage, your management accounts and cash flow planning will also be wrong.
Our bookkeeping for healthcare service helps pharmacy owners keep NHS income, service income, VAT records, payroll costs and MTD submissions aligned throughout the year.
Review Your VAT Partial Exemption Position
Independent prescribing, Pharmacy First, PCS and other clinical services can affect your income mix.
Where your pharmacy has both VAT-exempt healthcare income and taxable retail income, VAT partial exemption should be reviewed carefully. Adding a new service income stream can change the ratio and affect the amount of input VAT that can be recovered.
This is particularly important if your pharmacy has significant standard-rated retail sales, private services, online sales or mixed-use costs.
Our VAT specialist team reviews partial exemption positions for pharmacy clients when new service categories are introduced or when the income mix changes materially.
Review Payroll and Staffing Cost
The funding uplift should not be reviewed in isolation. You also need to model the cost side.
From April 2026, payroll pressure includes the National Living Wage at £12.71 per hour for workers aged 21 and over, employer NIC at 15% above the £5,000 secondary threshold, and continuing locum cost pressure in many areas.
For pharmacies with extended opening hours, high service demand or reliance on locum pharmacists, employment cost modelling should be part of the 2026/27 budget review.
Stress Test Cash Flow
Even where income is increasing, cash flow can still become tight.
This is because NHS payments, supplier terms, payroll, VAT, PAYE, corporation tax, rent and loan repayments all move on different dates. A profitable pharmacy can still experience pressure if timing differences are not managed.
Your cash flow forecast should include:
Expected NHSBSA payments
Supplier payment dates
Payroll and pension dates
VAT payment dates
PAYE and NIC dates
MTD quarterly update preparation
Corporation tax or income tax payments
Loan repayments
Seasonal changes in OTC and retail sales
Expected service income from Pharmacy First, PCS, PQS and IP
This gives pharmacy owners a clearer view of whether the 2026/27 settlement improves real cash flow or whether working capital still needs close control.
Frequently Asked Questions
Clear answers to the most common questions community pharmacy owners are asking about the 2026/27 CPCF, rolled-forward funding, Single Activity Fee rates, independent prescribing, NHSBSA reconciliation and pharmacy cash flow planning.
The 2026/27 deal says the SAF increases from May activity. Does that mean my April payment is still at £1.46?
Yes. The increase in the Single Activity Fee to £1.52 applies from activity delivered in May 2026 onwards. April 2026 dispensing activity should still be treated at the 2025/26 rolled-forward rate of £1.46 per item.
This means April 2026 is the transition month at the lower rate, while May 2026 is the first full activity month at the new £1.52 SAF. Your NHSBSA reconciliation should clearly separate April and May activity so income is not overstated or understated.
The 2026/27 deal writes off up to £239 million of margin over-delivery. Does this mean I get a cash payment?
No. The write-off does not create a direct cash payment to individual pharmacies. It means historic over-delivery will not be recovered in the way it otherwise could have been through future Drug Tariff reductions.
The practical benefit is a stronger forward funding position and better margin outlook than if the over-delivery had been clawed back. Pharmacy owners should still monitor purchasing margin, Category M movements and gross profit through monthly management accounts.
Does the merger of Pharmacy First budget into the core CPCF change what I get paid for consultations?
The standard consultation fees do not change simply because the budget has been merged into the core CPCF. Pharmacy First consultations remain paid at the relevant service fee, and Pharmacy Contraception Service consultations remain separate service income.
The main change is structural. The combined funding pot gives the sector more certainty and reduces the concern around unspent service budget being treated separately. For individual pharmacies, the priority is still to claim every eligible consultation correctly and track Pharmacy First income separately from dispensing income.
I have a pharmacist who recently qualified as an independent prescriber. When can we start billing the £525 IP fee?
The £525 amount should not be treated as a per-consultation fee. Under the 2026/27 CPCF, independent prescribing funding includes a one-off £500 setup payment where the requirements are met, plus a £525 monthly infrastructure payment.
Independent prescribing is expected from autumn 2026 and will be an optional service. Consultation fees are paid separately under the relevant Pharmacy First or Pharmacy Contraception Service arrangements. Set up separate nominal codes for the setup payment, monthly infrastructure payment and related consultation income before your pharmacy goes live.
My accounts for April and May 2026 were prepared using the rolled-forward 2025/26 rates. Do I need to restate them?
Your April 2026 management accounts should normally remain at the 2025/26 SAF rate of £1.46, because April activity was under the rolled-forward position. No restatement should be needed for April purely because the May SAF rate changed.
Your May 2026 management accounts should reflect the new £1.52 SAF rate for activity delivered in May. If May was prepared using £1.46, accrue the additional 6p per item as a May income adjustment. For a pharmacy dispensing 8,000 items in May, that would be an additional £480 income accrual.
What should pharmacy owners do now the 2026/27 CPCF has been confirmed?
Rebuild your 2026/27 income budget using confirmed figures, reconcile April and May NHSBSA schedules at the correct SAF rates, set up independent prescribing income codes, review VAT partial exemption, and update MTD-compatible records before the first quarterly update deadline.
Where service income, NHS dispensing income, payroll costs and VAT are all moving at the same time, working with a specialist pharmacy accountant can help prevent missed income, weak forecasting and avoidable cash flow pressure.
Managing the 2025/26 Baseline and 2026/27 CPCF Transition
“`The community pharmacy funding position in 2026 has two parts. The 2025/26 baseline, including £3.073 billion of core funding, SAF at £1.46, Pharmacy First at £17 and margin at £900 million, governed pharmacy finances from April 2025 and was rolled forward while 2026/27 negotiations continued.
The 2026/27 settlement now gives more certainty. Total funding rises to £3.636 billion, SAF increases to £1.52 from May 2026 activity, the margin allowance increases to £1.1 billion, up to £239 million of historic over-delivery is written off, and independent prescribing will be introduced from autumn 2026 with a setup payment and monthly infrastructure funding.
- Use £1.46 SAF for April 2026 activity and £1.52 from May 2026 activity onwards.
- Do not treat the £525 independent prescribing payment as a per-consultation fee.
- Set up separate nominal codes for IP setup income, IP infrastructure income and consultation income.
- Reconcile NHSBSA payment schedules every month to prevent income leakage.
- Review VAT partial exemption where NHS clinical service income has changed.
- Model employer NIC, National Living Wage, locum cover and staffing costs in full.
- Prepare MTD-compatible records before the 7 August 2026 quarterly update deadline.
Working with a specialist pharmacy accountant gives you clearer management accounts, better NHS income reconciliation and stronger cash flow decisions while the new CPCF arrangements bed in.
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