What Does Budget 2026 Mean for GP Practices? Wage Rises, VAT on Locum Supplies and Partners’ Tax

What was in the Budget for the NHS and general practice?

The Chancellor, John Healey, told the Commons that the government is spending £37bn more on health this year and announced a review of NHS productivity and AI (Budget 2026 speech). The Budget document says the independent review will inform the next spending review. NHS Employers’ summary adds that the NHS in England receives an extra £190 million in 2026 to 2027 for winter and other pressures, and £100 million to speed up robotic assisted surgery.

General practice, dentistry and pharmacy are not mentioned in the speech, and the Budget document contains no measure for GP contracts or premises. The 2026/27 contract uplift and the dispute over it stand as they were, which our post on the GP contract talks and practice finances sets out. What the Budget does change is the cost side, through wages, VAT and the tax rules partners pay under.

How much will the minimum wage rise cost a practice?

The Low Pay Commission’s recommendations were accepted on Budget day. From April 2027 the National Living Wage rises by 50p, or 3.9%, to £13.21 an hour, the 18 to 20 rate rises to £11.27 and the 16 to 17 and apprentice rates rise to £8.31 (GOV.UK, LPC recommendations take the National Living Wage to £13.21). The Budget document gives the start date as 1 April 2027 and says the rise is worth £910 a year in gross pay for a full time worker.

For a practice the arithmetic goes further than the people on the minimum. Reception, administration and care navigation roles often sit at or just above the National Living Wage, and a rise at the bottom tends to compress the gap to the next band, so practices usually end up lifting several grades. On top of pay, employer National Insurance stays at 15% on earnings above a secondary threshold of £96 a week in 2027 to 2028, and the thresholds are held at 2026 to 2027 levels until 2030 to 2031, as Annex A to the Budget shows. The Employment Allowance is £10,500, but GOV.UK’s eligibility rules say an employer cannot claim it if more than half its work is in the public sector, such as NHS services, so most GP practices are outside it.

Clinical capacity has a different funding route. Under the 2026/27 GP Employment Reimbursement Scheme a practice can claim up to £4.57 per patient for additional GP capacity, and since 1 October 2026 that has included locum sessions at up to £78.41 an hour, or £79.84 in London, with claims running to 31 March 2027, according to the BMA’s guide to the scheme. Where recruitment runs ahead of reimbursement, practice recruitment finance and practice working capital cover the gap.

What is the VAT change on deputies for a medical practitioner?

This is the measure most likely to be missed. The Budget overview says the government will remove the VAT exemption under Item 5 of Group 7 for the supply of a deputy for a registered medical practitioner, so that such a supply becomes standard rated from 1 May 2027. Deputising services remain within the medical exemption where they are primarily providing medical care (Overview of tax legislation and rates, paragraph 1.56). HMRC’s policy paper says the change restores the previously intended position, so that medical care, but not staff, continues to be exempt (HMRC, VAT, removal of the exemption for a deputy for a medical practitioner).

The distinction that matters is between buying medical care and buying a person. A locum GP who contracts with the practice to provide medical care, or an agency whose supply is medical care, stays exempt. A supply that is in substance the provision of staff, where the practice directs the work, is the kind of arrangement the change is aimed at. A GP practice makes mostly exempt supplies and generally cannot reclaim VAT on its costs, so VAT added to a staff supply from May 2027 would be a real cost at 20% of the fee.

Nobody should rewrite their locum contracts on a news post. Ask your accountant to look at how each locum and agency arrangement is supplied, what the contracts say about who controls the work, and whether anything should change before 1 May 2027. Agencies will be working through the same question, so ask them what they intend to charge.

What changes for GP partners’ own tax?

• Payments on account. From April 2029, Self Assessment taxpayers who make payments on account will have to make more regular in year payments towards their final bill. Payments will be automated, and eligible taxpayers will be able to choose to pay through PAYE (Overview of tax legislation and rates, paragraph 2.31). The detail is due next year. For partners it means the move from two large payments to several smaller ones, which is easier on cash flow once it settles and harder in the first year of transition.
• Mileage. The rate for business miles above 10,000 rises from 25p to 35p from 6 April 2027 (paragraph 2.7). The Budget document also restates the 55p rate for the first 10,000 miles announced in May.
• Property income. A partner who owns the surgery personally and is paid rent by the practice should ask their accountant whether that rent is property income, because the income tax rates on property and savings income rise to 24%, 44% and 49% from 6 April 2027 (paragraphs 1.1 and 1.2).
• Making Tax Digital. Partnerships are not yet in Making Tax Digital for Income Tax. Sole traders and landlords who join in April 2027 will not get late submission penalty points on quarterly updates for 2027 to 2028 (paragraph 2.36).
• Selling up. The Business Asset Disposal Relief lifetime limit is halved to £500,000 for disposals on or after 6 April 2027. Our post on selling a practice or buying into a partnership after Budget 2026 has the detail, and our guide to becoming a GP partner covers the buyer’s side.

What does it mean for practice cash flow and funding?

None of this changes what partners owe on 31 January 2027, which is the first bill to plan for, and the wage rise and VAT change arrive in April and May 2027. A practice that funds its tax, its staffing step up or a surgery refit from the same month’s income will feel all three at once. Spreading the lumpy items keeps drawings steady.

Lenders on our panel publish tax, VAT and PII funding at 8.9% to 22% a year. These are indicative published ranges from October 2026, and your rate depends on the practice and the term. Partners’ tax funding spreads the January and July bills, our guide to funding tax bills compares a loan with an HMRC payment plan, and the tax bill funding calculator shows the monthly cost. For premises, practice premises finance funds a purchase or extension, and our medical practice loans page shows the full range for GP practices. Our round-up of what Budget 2026 changed for professional practices covers the measures that apply to every practice.

What should partners and practice managers do before April 2027?

• Cost the April 2027 pay rise across every grade, not just the roles on the minimum, and add employer National Insurance at 15%.
• List every locum and agency arrangement and ask your accountant which could become standard rated from 1 May 2027.
• Check your 2026/27 reimbursement claims, including locum sessions since 1 October 2026, are up to date.
• Partners, ask your accountant what the 2029 move to in year payments means for your drawings, and confirm what is due on 31 January 2027.
• If a bill or a staffing step up needs funding, find out what lenders would support before it is urgent.

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Published 29 October 2026. Figures and dates are taken from the sources named and were correct on that date. This article is for general information only and should not be treated as legal, tax, accounting or financial advice. Funding availability and lender requirements depend on individual circumstances.