Budgeting & cashflow planning for GP practices

With the 2025/26 contract now published and the increase in employer National Insurance in effect, it’s more important than ever for practices to look ahead and take control of their finances.

Practice income used to be predictable. But changes like Primary Care Networks, ARRS staff, delayed contract guidance, rising staff costs, and tax changes have made cashflow planning essential. Practices need a clear view of their expected financial position to make informed decisions.

Here’s how budgeting and cashflow forecasting can help.

Drawings calculations

Partners’ drawings are paid on account of expected profits. If your forecast is based on outdated profit levels or a different partner mix, you risk overpaying during the year. This can cause cashflow pressure and may require partners to repay funds or take reduced drawings later.

Forecasting profits at the start of the year helps set realistic drawings and allows time to adjust if profits are expected to fall.

Tax estimates

Whether the practice pays partners’ tax or not, saving for tax is vital. Unexpected tax bills can disrupt cashflow or lead to HMRC interest charges.

Forecasts help you adjust tax savings early. If the practice pays the tax, speak to the partners’ accountants well ahead of July and January deadlines. Make sure monthly drawings are adjusted to set funds aside. If partners pay tax themselves, they'll need enough warning to avoid requesting extra drawings.

Cashflow forecasting helps identify available funds to meet tax demands without overstretching the practice.

Pension contributions

Pension deductions are based on estimated profits. Accurate estimates help smooth cashflow and reduce the risk of large year-end adjustments. This also ensures tax relief is claimed in the right tax year.

Better decision-making

Good financial information supports better decisions, especially around staffing. Once you take on a new employee, it's hard to reverse. Forecasting helps you assess if the business can afford the commitment.

Monitoring results (variance analysis)

Once you've created a forecast, track actual results and compare them to your estimates. If there's a significant difference, ask:

• Did we expect this?
• Do we know why it happened?

If the answer is no, it’s time to investigate – check for errors, missing income, or unauthorised spending.

How to budget

A profit forecast typically covers 12 months and estimates income and expenses. It doesn't need to be exact – it just needs to be reasonable.

Estimating income

Most income comes from the core contract, which you can estimate by multiplying weighted patient numbers by the contract value per patient. Other income, such as QOF, enhanced services, and dispensing, can usually be based on last year’s figures, adjusted for known changes.

Estimating expenses

Start with your latest payroll and factor in employer costs like tax, NI, and pension contributions. Adjust for agreed pay rises or staff changes. Other costs can follow last year’s figures, adjusted for inflation or known changes.

Be mindful of changes in your GP partner mix. A partner leaving and being replaced by a salaried GP may lower total profit but increase individual shares if fewer partners are involved.

Use your software

Many accounting systems offer reports you can run regularly or receive by email. These help you monitor performance and flag unusual activity early.

Your accountants can also support you with budgeting and forecasting. If you'd like help getting started, we're here for you.

Need help?

Effective budgeting and cashflow planning can make a real difference to your practice’s financial stability. Get in touch with your usual Larking Gowen contact or email enquiry@larking-gowen.co.uk.

Louise Dean