GP practice cash flow after the 2025/26 contract: where the uplift actually goes

# GP practice cash flow after the 2025/26 contract: where the uplift actually goes

When headline contract investment rises, it is tempting to assume partner drawings can rise with it. Practice managers know the gap: cash arriving in the bank and cash free to draw are different numbers.

This guide is a calm way to read the 2025/26 funding environment, map where money is ringfenced, and run a monthly cash conversation that partners will actually use.

The headline versus the felt experience

National figures for 2025/26 pointed to a meaningful cash uplift across the core practice contract and related network arrangements. At the same time, practices have been absorbing:

• higher employer National Insurance costs
• National Living Wage and knock-on pay compression
• locum and salaried GP market rates
• premises, energy, and supplies inflation
• demand that does not politely follow the cash profile

So a practice can receive more income and still feel tighter. That is not a failure of bookkeeping, it is a cost-structure problem that needs a clear map.

Draw the money map (one page)

Split income into three buckets on a single sheet:

A: Flexible core

Global sum / core contract income and other funds you can steer toward the whole practice cost base.

B: Ringfenced / directed

PCN and other streams that must be spent in defined ways (often additional roles, specific services, or reporting-linked pots).

C: Activity / claims

Items that move with delivery (enhanced services, QOF-related flows, local commissions). Timing and achievability vary.

Then list cost under:

1. Clinical pay (partners, salaried, locums)
2. Non-clinical pay
3. Employer on-costs (NI, pension)
4. Premises and running costs
5. Professional fees, indemnity, IT
6. Loan / lease commitments

The insight usually appears in ten minutes: Bucket B grew, Bucket A did not grow enough to cover on-costs, and partners were still budgeting as if all income were Bucket A.

Why NI and wage changes hit so hard

Even when a national uplift is said to “cover” cost pressures, the distribution across practices is uneven. A practice with more employed staff feels NI differently from a partner-heavy model. Locum reliance creates another profile again.

Practical habit: each time a national cost change is announced, ask payroll for a 12-month incremental cost estimate before you adjust drawings. Hope is not a cash-flow method.

Partner drawings: set a rule, not a mood

Agree a simple policy:

• Maintain a cash buffer (for example, X weeks of payroll + locum contingency).
• Review drawings monthly against rolling 3-month cash.
• Separate tax reserves from operating cash (partners still need to pay personal tax on practice profits).
• Do not treat year-end accounting profit as cash in the bank.

If drawings must fall temporarily, explain it with the money map, not with blame.

PCN money without the fog

PCN funding can improve access and capacity while still stressing the practice if:

• reimbursement rates lag true employment cost
• admin time is invisible in the budget
• cash arrives on a different rhythm to payroll

Treat PCN activity as a mini business unit: income, direct staff cost, on-costs, and management time. If it cannot stand up on that basis, escalate early with the network, not after payroll week.

A monthly 45-minute finance meeting agenda

1. Bank position versus buffer target
2. Income by bucket (A/B/C) versus budget
3. Payroll + locum run-rate
4. Claims/QOF risk (what might not land)
5. Drawings decision (hold / trim / restore)
6. One action owner for any gap

Keep minutes to one page. Practices that do this for six months make better partnership decisions than practices that only stare at the year-end accounts.

Year-end still matters: it is not the same as cash flow

Accounts tell you profitability, capital, and tax. Cash flow tells you whether you can pay people on Friday. You need both.

When your accountant prepares management accounts, ask for:

• a short cash bridge (opening cash → closing cash)
• partner current account movements
• a note on ringfenced balances you should not mentally spend

Three conversations partners avoid (and should not)

1. Locum dependency

Locum spend can be clinically necessary and financially corrosive at the same time. Track it as a line item with a monthly ceiling and a trigger for partnership discussion when the ceiling breaks twice in a quarter.

2. Who is carrying unpaid tax

Practice profits and personal tax payments get blurred. If partners draw cash that should have been reserved for Self Assessment, the practice did not “have a good year”; it borrowed from next January.

3. Premises and long leases

Lease accounting and cash are different topics, but both matter. A practice can be covenant-tight on cash while also facing larger balance-sheet lease figures under newer accounting rules. Flag big renewals early.

A simple buffer formula practices reuse

Many partnerships find this workable as a starting point (adjust for local risk):

Buffer target = 6–8 weeks of payroll (including on-costs) + one month’s average locum contingency + known tax reserves held for partners

Review the target twice a year. After a tough winter or a recruitment gap, raise it. After a stable year with strong claims performance, you may hold steady, not automatically spend the surplus on drawings.

What “good” looks like after three months

You will know the rhythm is working when:

• partners stop asking “can we draw more?” without looking at the buffer first
• PCN income is no longer treated as general spending money by default
• locum spikes trigger a conversation before they become a habit
• the year-end accounts contain fewer surprises because cash was managed in-year

That is operational finance, and it is what keeps partnerships intact when national headlines and local reality diverge.

One-page pack to leave on the practice noticeboard

Print or share:

1. Money map (Buckets A/B/C)
2. Buffer target number
3. Monthly meeting agenda
4. Named owner for claims/QOF risk
5. Next drawings review date

If those five items are visible, the partnership is already ahead of most practices that only discuss money when something hurts. Revisit the pack whenever the contract year changes or a major staff cost lands, otherwise it becomes wallpaper. Share it with new partners at induction so drawings conversations start from the same facts.

If your partnership wants help turning this into a shared drawings range for the next two quarters, we are happy to help. Bring the latest bank position, payroll summary, and your PCN/core income lines, then contact us to book a cash and drawings review.

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General information for UK primary care organisations. Contract details vary by nation and local commissioning. This is not a forecast for any individual practice.