This pharmacy funding 2026/27 UK guide explains what community pharmacy owners need to know while the 2026/27 Community Pharmacy Contractual Framework remains unresolved. It covers the rolled-forward 2025/26 funding arrangements, current CPCF uncertainty, April 2026 cost increases, PQS planning risks, NHSBSA reconciliation priorities and the cash flow steps pharmacy owners should take until a new funding settlement is confirmed.

If you are a community pharmacy owner in England waiting for clarity on your 2026/27 funding, you are not alone and you are not imagining the uncertainty. As of the date of this guide, the Community Pharmacy Contractual Framework (CPCF) for 2026/27 has not been agreed. Negotiations between Community Pharmacy England (CPE), the Department of Health and Social Care (DHSC), and NHS England are ongoing, and CPE has confirmed that discussions are expected to continue into the new financial year. The 2026/27 contract did not land before 1 April 2026 as pharmacy owners had hoped.

This is not a minor administrative delay. CPE has acknowledged that the lack of certainty makes managing finances all the more difficult and planning for the future almost impossible words that resonate with every pharmacy owner currently trying to set staffing budgets, plan capital investment, and manage cash flow without knowing what their annual contract value will be.

This guide explains where pharmacy funding currently stands, what arrangements are in place while negotiations continue, what the 2025/26 settlement provided as a baseline, what CPE is pushing for in 2026/27, and critically what pharmacy owners should be doing right now to manage their finances through the uncertainty. Because while the contract remains unresolved, your financial obligations to HMRC, your staff, and your suppliers do not pause.

Where Things Stand: No 2026/27 Contract as of May 2026

The most important fact for pharmacy owners to understand is that there is no agreed 2026/27 CPCF. Whilst all parties have been working hard on the negotiations, it is clear that they will not reach a conclusion before the start of the financial year on 1 April, CPE confirmed in late March 2026. Until negotiations have concluded, arrangements will continue as they are currently the contractual framework rolls forward until the conclusion of negotiations and any changes to funding and services are introduced.

In practical terms this means that from 1 April 2026, community pharmacies in England are operating under a rolled-forward version of the 2025/26 CPCF until a new agreement is reached. DHSC has applied a margin uplift to the April Drug Tariff as an interim measure but the full 2026/27 funding settlement, including any changes to fees, services, and the margin allowance, remains subject to the outcome of negotiations that are still ongoing. Wikipedia

This is an unusual and financially challenging position. Pharmacy owners cannot plan their 2026/27 budget with confidence because the income side remains uncertain. And yet the cost side employer National Insurance at the new 15% rate from April 2026, National Living Wage at £12.21 per hour, and all other operating costs has risen with no corresponding confirmed income uplift to offset it.

Key Point: Operating under a rolled-forward contract is not the same as receiving no funding your pharmacy continues to be paid under the 2025/26 framework terms until a new agreement is reached. But it does mean that any improvements to fees, services, or margin that CPE secures in 2026/27 negotiations will arrive mid-year rather than from 1 April. The timing of when the deal lands will affect your cash flow for the full year.

The 2025/26 Settlement: The Baseline You Are Currently Working From

To understand the 2026/27 position, you first need to understand what the 2025/26 settlement provided because this is the framework your pharmacy is currently operating under and the baseline against which any 2026/27 deal will be measured.

The 2025/26 CPCF settlement was announced on 31 March 2025 and covered both 2024/25 and 2025/26 in a single two-year agreement. The settlement takes baseline annual CPCF funding for 2025/26 to £3.073 billion and secures a further £215 million to fund the continuation of Pharmacy First and other Primary Care Recovery Plan services.

The 2025/26 uplift represents a 15% increase in government spending on the previous year, higher than the record 5.8% growth in the total NHS budget.

The specific changes introduced in the 2025/26 settlement that are most financially material for pharmacy owners include:

Single Activity Fee increase to £1.46 per item

From 1 April 2025, the Single Activity Fee increased by 19p to £1.46 per item. The SAF for items dispensed from 1 April 2025 is set at £1.46. This is the core per-item dispensing fee that forms the foundation of your dispensing income — the increase from £1.27 represented a 15% uplift on this component. This rate remains in place under the rolled-forward 2025/26 arrangements.

Margin allowance increase to £900 million

The margin allowance for community pharmacy rose to £900 million per year up from £800 million. The retained medicine margin is the profit pharmacies earn on purchasing medicines below the Drug Tariff reimbursement price, delivered primarily through Category M of the Drug Tariff. This is not a fee that appears directly on your payment schedule it is built into the Drug Tariff pricing mechanism. The £900 million allowance represents the government’s estimate of the aggregate margin available across all pharmacies, not a per-pharmacy guarantee.

Write-off of historic margin overspend

The settlement also secures a write-off of historic margin overspend, with £193 million being written off. This eliminated the accumulated debt from periods where the pharmacy sector had received more margin than the agreed allowance — a significant concession that removed a cloud hanging over the sector’s finances. Kudos Accounting

Pharmacy First fee increase

Fees for Pharmacy First and contraception services were increased to £17 and £25 respectively, and a new intermediary band for the Pharmacy First monthly payment was agreed. The consultation fee for core Pharmacy First clinical pathways is therefore £17 per completed consultation under the current rolled-forward arrangements, up from the original £15 at launch.

New Medicine Service antidepressants added

Antidepressants were added to the New Medicine Service. This expanded the range of conditions for which pharmacies can claim NMS payments, adding a new income stream for pharmacies delivering adherence support for patients newly prescribed antidepressants.

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 at an NHS-funded level, creating a new income stream for pharmacies commissioned to provide it.

The Funding Gap: Why the 2025/26 Settlement Was Not Enough

Despite representing the largest funding uplift across the entire NHS, the 2025/26 settlement was explicitly acknowledged by CPE as insufficient to fully stabilise the sector. Understanding this context is essential for pharmacy owners assessing their own financial position.

The £3 billion pharmacy funding package falls £1.99 billion short of the estimated full cost of NHS pharmacy services. The Frontier Economics analysis commissioned by NHS England and published alongside the settlement — estimated the true cost of delivering NHS community pharmacy services in England at approximately £5 billion per year, against the £3 billion being provided.

In a letter sent to the government in January 2026, CPE called on the government to speed up its progress towards stabilising the sector and begin a long-term recovery plan. “Businesses are losing money and accumulating debt, and operationally, pharmacies are struggling to cope with the ongoing demand from patients and the public,” the letter said.

Malcolm Harrison, chief executive of the Company Chemists’ Association (CCA), said “urgent action” was needed to support the sector. “Despite the 4% uplift for 2024/2025 and 14% for 2025/2026, the sector continues to operate under a contract that fails to meet the full economic cost of delivering NHS pharmaceutical services.” Wikipedia

For individual pharmacy owners, this sector-wide funding gap manifests as negative margins on NHS dispensing activity — particularly on high-volume, low-margin generics that must be cross-subsidised by retained margin, private services, and over-the-counter retail sales. The April 2026 cost increases in employer NIC and NLW have widened this gap further, with no confirmed compensating income increase yet agreed for 2026/27.

What CPE Is Pushing for in 2026/27 Negotiations

While the detail of negotiations is confidential, CPE has been public about its top priorities for the 2026/27 contract. The committee’s top priority is negotiating a more sustainable CPCF — including improved margin delivery, fees, reimbursement and making the case for a multi-year roadmap with DHSC and NHS England to give pharmacies long-term certainty.

The specific areas CPE has identified as priorities include:

Improved margin delivery the £900 million margin allowance agreed for 2025/26 remains below what the Frontier Economics analysis suggested is necessary. CPE is pushing for an increase in the margin envelope in 2026/27 to better reflect the actual cost of drug purchasing.

Fee increases the SAF at £1.46 per item, while improved from the previous £1.27, still represents a fraction of the true cost of dispensing a prescription when staff, overheads, and regulatory compliance are factored in. CPE is seeking further fee increases.

Multi-year roadmap rather than annual or two-year settlements that create recurring uncertainty, CPE is making the case for a longer-term funding commitment that gives pharmacy owners the visibility to invest and plan. This would represent a structural change to how pharmacy is funded, not just an annual uplift.

Reimbursement reform addressing the complexity and unpredictability of Category M pricing, clawbacks, and the timing of Drug Tariff updates that create cash flow challenges for pharmacy owners throughout the year.

Regulatory reform CPE has also been pushing for changes to distance selling pharmacy regulations and other structural issues that affect the operating environment.

CPE has secured a pledge to begin 2026/27 negotiations shortly after the summer Spending Review process concluded, along with commitments to improving the medicine margin survey and consideration of further strategies to stabilise Category M.

The April 2026 Cost Increases: What They Mean for Your Pharmacy

While the 2026/27 CPCF remains unresolved, the cost increases that took effect on 1 April 2026 are very much resolved — and they are already flowing through your payroll.

The employer NIC rate increased from 13.8% to 15% and the secondary threshold dropped from £9,100 to £5,000 from 6 April 2026. For community pharmacies which typically employ a mix of pharmacists, pharmacy technicians, dispensary assistants, and counter staff this is a significant additional employment cost. As modelled in our employer NIC changes guide, the combined effect of the rate increase and threshold drop generates materially higher employer NIC bills from April 2026 for every employer regardless of sector.

For a community pharmacy employing six staff at average salaries of £28,000, the additional employer NIC cost from April 2026 is approximately £3,000 to £4,000 per year before the National Living Wage impact is added. A dispensary assistant previously earning £11.44 per hour now earns a minimum of £12.21 per hour from 1 April 2026, increasing both the wage cost and the employer NIC on the higher base salary.

These cost increases arrive at a time when the 2026/27 CPCF has not yet confirmed what additional income if any — will be available to offset them. For pharmacy owners, this means the first months of 2026/27 are operating on a funding basis that has not been adjusted for the new cost environment, while the cost base has risen significantly.

The Pharmacy Quality Scheme 2026/27: No Confirmation Yet

The Pharmacy Quality Scheme (PQS) is an annual quality incentive scheme that rewards pharmacies for meeting specified quality criteria. It has been a valuable income stream for participating pharmacies — providing up to £75 million per year across the sector.

Negotiations on the CPCF arrangements for 2026/27 are still in progress between Community Pharmacy England, DHSC and NHS England. Therefore there is no update yet on whether there will be a Pharmacy Quality Scheme in 2026/27. When negotiations have concluded, this page will be updated to highlight if a PQS has been agreed for 2026/27. Wikipedia

For pharmacy owners who have relied on PQS income as part of their annual financial planning, this uncertainty is significant. The PQS typically requires pharmacies to demonstrate compliance with quality criteria over the year — which means that the later a 2026/27 PQS is confirmed, the less time pharmacies have to meet any criteria before the assessment period closes.

If you have been accruing PQS income in your management accounts for 2026/27 on the assumption that the scheme will continue, you should review this assumption urgently. Until the scheme is confirmed, accruing PQS income risks overstating your income and understating your true financial position. Our pharmacy accounting team reviews the accrual basis for all pharmacy income streams — including PQS — for clients at the start of each year.

How to Manage Your Pharmacy Finances Under the Current Uncertainty

The absence of a confirmed 2026/27 CPCF does not remove your financial management obligations it makes them more important. Here is what pharmacy owners should be doing right now.

Build your 2026/27 budget on the rolled-forward 2025/26 rates

Until the new contract is agreed, your income planning should be based on the current rolled-forward 2025/26 rates — SAF at £1.46 per item, Pharmacy First at £17 per consultation plus the £1,000 monthly establishment payment, the NMS at its current rate, and the rolled-forward margin allowance. Do not budget for improvements that have not yet been confirmed.

Model the April 2026 cost increases in full

Ensure your budget fully reflects employer NIC at 15% from April 2026, the secondary threshold at £5,000, the NLW at £12.21 per hour, and any pay increases for staff above the NLW. The gap between your April 2026 cost base and your rolled-forward income is your current funding gap — you need to know this number before you can manage it.

Do not accrue unconfirmed PQS income

As noted above, until the 2026/27 PQS is confirmed, do not include it in your income projections or management account accruals. If it is confirmed later in the year, include it from that point. This is conservative but protects you from overstating profitability based on income that has not yet been agreed.

Maintain your NHSBSA reconciliation process monthly

The uncertainty around 2026/27 funding makes it more important than ever to ensure you are capturing every pound of income you are entitled to under the current arrangements. Monthly reconciliation of your NHSBSA payment schedule checking that all dispensing activity, Pharmacy First consultations, and enhanced service claims have been correctly processed and paid — is your primary defence against income leakage. Our guide on pharmacy NHS dispensing income, clawbacks and reconciliations covers the reconciliation process in full.

Stress test your cash flow against delayed settlement scenarios

The 2026/27 contract may not land until mid-year. If improvements to the margin allowance or fee rates are confirmed in, say, October 2026, your pharmacy will receive a retroactive adjustment for the period from 1 April — but the timing of that cash receipt matters for your working capital position. Model what your cash flow looks like if the settlement lands in Q2 versus Q3 of 2026/27, and ensure your overdraft or working capital facility is adequate to cover the gap.

Review your VAT partial exemption position

If your pharmacy delivers Pharmacy First and other enhanced services alongside standard dispensing, your VAT partial exemption calculation should reflect the current income mix. With fees for Pharmacy First increased to £17 per consultation under the current framework, and EHC now available as a commissioned service, the proportion of your income that is VAT-exempt may have shifted. An incorrect partial exemption ratio affects every quarterly VAT return. Our VAT specialist team reviews partial exemption calculations for pharmacy clients each year.

What to Do When the 2026/27 Deal Is Announced

When the 2026/27 CPCF is eventually agreed — and CPE has committed to updating pharmacy owners as early as possible — there will be several immediate financial management actions required.

Update your budget immediately. The moment the deal terms are confirmed, rebuild your 2026/27 income budget using the new rates. Calculate the full-year impact of any fee changes, margin adjustments, and new or amended services. Identify any retroactive adjustments for the period from 1 April that will arrive as lump sum payments.

Update your NHSBSA payment schedule accruals. If new fee rates apply retroactively from 1 April 2026, you will need to accrue the additional income for the months between April and the date the deal was agreed. Ensure your bookkeeping captures this correctly — posting the retroactive adjustment as income in the periods it relates to rather than in the month the cash arrives.

Review your nominal ledger for any new services. If the 2026/27 deal introduces new commissioned services or changes the structure of existing ones, update your chart of accounts to capture the new income streams separately. Income from new services should have their own nominal codes from the date they commence — not be lumped into existing NHS income codes.

Reassess your MTD quarterly submissions. If you are within the MTD for Income Tax mandate — gross income above £50,000, which applies to most pharmacy sole traders and partnerships from April 2026 — ensure your quarterly MTD submissions are updated for the new fee rates when the deal is confirmed. An understatement of income in earlier quarters may require an adjustment in the final quarterly submission or the annual declaration

The Broader Context: Pharmacy Closures and Sector Sustainability

No guide to pharmacy funding in 2026/27 would be complete without acknowledging the stark backdrop against which these negotiations are taking place.

The financial uplift to the NHS contract has not been keeping pace with increased employment and drug costs, resulting in the closure of more than 650 community pharmacies in England last year — the highest number of closures in a 12-month period in the last twenty years. Kudosaccounting

A recent survey found that market sentiment is 44% negative with 31% looking to sell in 2026. The financial pressure facing community pharmacy is not abstract it is driving real decisions by real business owners about whether to continue operating, sell, or restructure. Kudosaccounting For pharmacy owners considering their exit options in this environment, the financial and tax planning around a pharmacy sale deserves careful attention. The BADR CGT rate increased to 18% from April 2026 meaning gains on a qualifying pharmacy disposal are now taxed at 18% on the first £1 million of lifetime qualifying gains, up from 14% in 2025/26. If you are considering selling your pharmacy, the timing and structure of the disposal should be reviewed with a specialist before any transaction is agreed. Our pharmacy accounting specialists can advise on exit planning alongside the ongoing financial management of your pharmacy business.