The Spending Review 2025 delivered what the government calls a “generous” NHS settlement: 3% average annual increase in day-to-day spending for NHS England from 2026/27 to 2028/29. Headlines proclaimed the NHS had been “prioritised” with the Department of Health and Social Care receiving a 2.8% average annual increase—significantly more than education (0.7%) or policing.
For GP practice owners and managers, however, the critical question isn’t whether the NHS received more than other departments. It’s whether this funding is adequate to cover the cost pressures your practice faces in 2026/27 and beyond: 3.6% contract uplift versus 3.3% staff pay rises, 15% employer National Insurance, frozen NHS thresholds, and flat capital budgets meaning no new equipment funding.
This comprehensive analysis examines exactly how the 2026-2029 funding settlement affects GP practices, what the numbers really mean for your budget, and how to navigate three years of financial pressure despite the proclaimed “generosity.”
Understanding the Funding Settlement
The Spending Review 2025 (Phase 2) set multi-year budgets from 2026/27 to 2028/29 for most departments, with NHS capital extending to 2029/30.
The Headline Numbers
NHS England day-to-day funding: 3% average annual increase (2026/27 to 2028/29)
DHSC overall: 2.8% average annual increase
NHS capital: Flat in real terms (2026/27 to 2029/30)
The settlement represents approximately £29 billion additional investment over the period, with capital budgets increasing from £10.9 billion in 2024/25 to £14.9 billion by 2029/30—described as “the largest ever health capital budget.”
GP Contract Uplift 2026/27
On 24 February 2026, NHS England published the specific GP contract details. The core contract receives a £485 million uplift, representing a 3.6% total increase and 1.4% real-terms growth after accounting for inflation.
This compares unfavorably to the 2025/26 settlement, which delivered £969 million (7.2% increase)—more than double the 2026/27 uplift.
Additionally, £292 million has been repurposed from the PCN-level Capacity and Access Payment (CAP) into a practice-level GP reimbursement scheme, working out to approximately £47,000 per practice to increase GP capacity through funding extra sessions or recruiting additional GPs.
However, practices with high GP-to-patient ratios must apply for these funds through their ICB rather than receiving automatic allocation.
The Reality: Funding vs Cost Pressures
While 3% and 3.6% increases sound reasonable, they must be measured against actual cost increases GP practices face in 2026/27.
Staff Cost Inflation
Agenda for Change 3.3% pay award: Confirmed 12 February 2026, affecting practice nurses, healthcare assistants, and administrative staff. For typical practices, this adds £5,000-£14,000 annually depending on staff numbers.
GP contract assumes 2.5% pay uplift: The 3.6% contract increase includes an assumption of 2.5% pay uplift. However, with RCN calling the 3.6% award for nurses “grotesque” and threatening industrial action, actual pay pressures may exceed assumptions.
Employer National Insurance at 15%: Increased from April 2025, this adds 15% to every salary payment (though Employment Allowance of £10,500 helps smaller practices).
National Living Wage: Rising to £12.71 per hour from April 2026, affecting lower-banded admin staff.
Working Example: Medium GP Practice
Current staff costs: £332,054 (12 staff: 4 Band 5 nurses, 2 Band 4 HCAs, 4 Band 3 HCAs, 2 Band 3 admin)
After 3.3% increase: £342,909 (+£10,855)
With employer NI and pension: Total additional cost £14,044 annually
Contract uplift received (3.6% on practice funding): Approximately £12,000-£15,000 depending on list size
Net position: Break-even at best, likely small deficit once other inflation accounted for.
This calculation explains why Matthew Taylor, NHS Confederation Chief Executive, warned that additional funding “won’t be enough to cover the increasing cost of new treatments, with staff pay likely to account for a large proportion of it.”
Non-Pay Inflation
Beyond staffing, practices face inflation on:
- Utilities and energy costs
- Medical supplies and equipment
- Insurance premiums
- IT and software subscriptions
- Building maintenance and rent
With overall inflation running above 2.5%, non-pay costs consume significant portions of any funding increase.
The QOF Changes Impact
From April 2024, 32 of 76 QOF indicators were permanently retired, representing 212 QOF points worth approximately £298 million in 2025/26. This money was redistributed to global sum payments, routine childhood vaccinations, and locum reimbursement rates.
The remaining 141 QOF points (worth approximately £198 million) now target cardiovascular disease prevention specifically.
While income was “protected” through redistribution, practices lose the ability to earn additional income through QOF performance improvement—reducing opportunities to boost revenue beyond contracted amounts.
Capital Funding: The Hidden Crisis
While day-to-day funding received attention, the capital settlement may create even more significant long-term problems for GP practices.
Flat Real-Terms Capital Budget
Capital budgets remain flat in real terms from 2026/27 to 2029/30. After accounting for inflation and medical equipment price increases, this represents a real-terms cut in available capital.
The 2024 Spending Review provided £122 million capital funding to support primary care investments, including GP IT and premises improvement grants. This funding will be allocated to ICBs on a weighted population basis.
However, with flat capital budgets for three years, practices cannot expect significant increases in premises grants or equipment funding despite aging infrastructure and technology needs.
What This Means for Your Practice
- Aging premises with deferred maintenance
- Outdated equipment requiring replacement
- Digital infrastructure falling behind patient expectations
- Inability to expand or reconfigure space for new service delivery models
Daniel Elkeles, NHS Providers Chief Executive, warned that while NHS England received record capital budgets on paper, these “do so by nowhere near enough to rebuild or replace the tired facilities and equipment large parts of the NHS currently relies on.”
Primary Care Allocations and “Fair Share”
ICB allocations will move towards their target distribution (“fair share”) over the 2026-2029 period, with deficit support funding for ICBs and NHS trusts removed.
This convergence policy means:
Underfunded ICBs: Receive above-average increases as allocations move toward target Overfunded ICBs: Receive below-average increases or flat funding
For practices in overfunded ICB areas, you may see minimal funding increases despite the 3% headline rate. Conversely, practices in historically underfunded areas may see above-average increases.
Check your ICB’s allocation position to understand whether you’ll benefit from or lose out during convergence.
Working with healthcare accountants who monitor ICB allocations helps you understand your practice’s specific funding trajectory.
Access Requirements and Funding Conditions
The 2026/27 contract includes new access requirements that affect how practices must operate:
Same-Day Response: Practices must provide a same-day response for all urgent patient requests and may not ask patients to contact practices at a later date.
Online Consultation Tools: Must remain open throughout core hours (8am-6:30pm) from 1 October 2025 for patients to submit non-urgent appointment requests.
Patient Charter: NHS England will publish standards of care that patients can expect, which practices must publish on their websites.
These requirements potentially increase workload without corresponding funding increases, creating additional cost pressures.
The £292 Million GP Capacity Funding
The repurposed £292 million from CAP to practice-level GP reimbursement (approximately £47,000 per practice) sounds substantial, but comes with conditions:
Purpose-restricted: Must be used to increase GP capacity through extra sessions or recruiting additional GPs
Application required: Practices with high GP-to-patient ratios must apply through ICBs rather than receiving automatic allocation
Uncertainty: Funding may not be automatic or guaranteed for all practices
For practices already struggling with recruitment, this funding may prove difficult to utilize effectively even if awarded.
Strategic Planning for 2026-2029
Given funding constraints relative to cost pressures, GP practices must adopt strategic approaches to maintain viability.
1. Detailed Multi-Year Budget Modeling
Create 3-year projections accounting for:
- Known cost increases (pay awards, NI, NLW)
- Expected ICB allocation based on convergence position
- Potential efficiency requirements (2% annually expected)
- Partner drawing sustainability
Our accountants for doctors specialize in multi-year GP practice modeling.
2. Efficiency Optimization
NHS England requires 2% efficiency gains annually. Focus on:
- Staff skill-mix optimization (appropriate use of HCAs, technicians)
- Technology reducing administrative burden
- Collaborative PCN working reducing duplication
- Process improvements increasing productivity
3. Diversified Income Streams
Explore additional income beyond core contract:
- Enhanced services maximization
- Private income where appropriate
- Premises income optimization
- Training practice income
4. Cash Flow Management
With funding potentially lagging cost increases, robust cash flow management becomes essential:
- 13-week rolling cash flow forecasts
- Contingency financing arrangements
- Quarterly financial reviews
- Partner drawing aligned to sustainable profitability
Professional bookkeeping for healthcare provides real-time visibility essential for managing tight margins.
5. Capital Planning
With flat capital budgets, strategic planning for major expenditures is crucial:
- Prioritize essential equipment replacement
- Explore ICB premises grants early
- Consider collaborative PCN capital projects
- Plan multi-year for major investments
Partner Income Implications
The funding settlement directly affects GP partner incomes. With contract uplifts barely covering cost increases, partner drawings face pressure from multiple directions:
Frozen tax thresholds until 2031: Fiscal drag pushes partners into higher tax bands despite modest income growth
Dividend tax increase (April 2026): 2% increase on dividend income for practice owners operating through limited companies
£100,000 personal allowance taper: Partners approaching six figures face effective 60% marginal tax rates
Strategic personal tax planning helps partners optimize their positions within these constraints.
Conclusion
The NHS Funding Settlement 2026-2029 delivers 3% average annual increases for NHS England and 3.6% for the GP contract in 2026/27—described as “generous” and “prioritizing the NHS.”
For GP practices, however, the reality is more challenging. With staff pay rising 3.3%, employer NI at 15%, National Living Wage increasing to £12.71, and flat capital budgets, the funding barely covers cost pressures, leaving nothing for service expansion, quality improvement, or maintaining partner incomes in real terms.
The settlement represents a holding pattern rather than transformation—keeping practices afloat while asking them to deliver access improvements, technology adoption, and the “left shift” to community care without the resources to invest in these changes.
Successful navigation of 2026-2029 requires detailed financial planning, ruthless efficiency optimization, strategic income diversification, and expert guidance from specialist healthcare accountants who understand GP practice economics.
At Kudos Accounting, we help GP practices develop multi-year financial strategies that maintain viability despite inadequate funding settlements. Our team provides detailed budget modeling, cash flow forecasting, tax planning, and strategic advice tailored to your practice’s specific circumstances.Don’t navigate this challenging period alone. Contact Kudos Accounting today for a confidential consultation about your practice’s financial position and discover strategies to maintain sustainability through 2026-2029.
Frequently Asked Questions (FAQs)
1. Is the 3% NHS funding increase enough to cover GP practice costs?
No—barely. The 3% NHS England increase and 3.6% GP contract uplift in 2026/27 must cover 3.3% Agenda for Change pay rises, 15% employer NI, National Living Wage increases to £12.71, and non-pay inflation. For most practices, funding roughly matches cost increases at best, leaving no resources for service improvement, equipment investment, or real-terms partner income growth. Practices must achieve 2% efficiency gains annually to remain viable.
2. What happened to the PCN Capacity and Access Payment (CAP)?
CAP funding (£292 million) was repurposed from PCN-level to practice-level GP reimbursement schemes from 2026/27. Practices receive approximately £47,000 each to increase GP capacity through extra sessions or recruitment. However, practices with high GP-to-patient ratios must apply through ICBs rather than receiving automatic allocation, and funding must be used specifically for GP capacity—not general practice costs.
3. How does “fair share” convergence affect my practice funding?
ICB allocations move toward target distribution (“fair share”) over 2026–2029, meaning historically underfunded ICBs receive above-average increases while overfunded areas receive below-average increases or flat funding. Your practice’s actual funding increase may differ significantly from the 3% headline rate depending on your ICB’s convergence position. Check with your ICB to understand your specific allocation trajectory.
4. Why is capital funding called “flat” when it’s increasing?
Capital budgets increase nominally from £10.9bn (2024/25) to £14.9bn (2029/30), but remain flat in real terms accounting for inflation. After medical equipment price increases exceed general inflation, this represents a real-terms cut in purchasing power. For GP practices, this means minimal premises grants or equipment funding despite aging infrastructure and technology needs.
5. Will the £47,000 GP capacity funding help with recruitment?
Potentially, but with significant challenges. The funding aims to support extra GP sessions or recruitment, but practices face a national GP shortage making recruitment difficult regardless of available funding. Additionally, practices with already-adequate GP-to-patient ratios must apply through ICBs rather than receiving automatic allocation, creating administrative burden and uncertainty. The funding helps but doesn’t solve the underlying workforce crisis.
6. What are the new access requirements in the 2026/27 contract?
Practices must provide same-day responses for all urgent patient requests (no asking patients to call back later), keep online consultation tools open throughout core hours (8am–6:30pm) from October 2025, publish NHS England’s patient charter on practice websites, and improve communication with community pharmacies including dedicated email addresses. These requirements increase workload without corresponding additional funding.
7. How should practices budget for 2026/27 given funding uncertainty?
Create detailed three-year projections including: all known cost increases (pay, NI, NLW, inflation), expected ICB allocation based on convergence position, potential efficiency requirements (2% annually), partner drawing sustainability, and contingency reserves (3–6 months operating costs). Model best-case, base-case, and worst-case scenarios. Engage specialist healthcare accountants for accurate modeling and quarterly reviews to adjust plans as funding details emerge.
8. Should GP partners consider changing their business structure given tax pressures?
Potentially. With dividend tax increasing 2% from April 2026, frozen tax thresholds creating fiscal drag, and personal allowance tapering above £100,000, the optimal partnership structure may have changed. Limited companies still offer tax advantages for higher earners, but the gap is narrowing. Partnership structures may benefit from simpler administration and clearer tax treatment. Specialist medical accountants can model both scenarios for your specific income level and recommend the optimal structure for 2026–2029.