Introduction

1. Government has announced 2026/27 NHS pay awards for Agenda for Change (AfC) staff, medical and dental staff groups (DDRB), as well as executive and senior managers (ESM) and very senior managers (VSM), following recommendations from the respective pay review bodies. In addition, government is preparing the implementation of the 2026 resident doctor (RD) deal, following the acceptance of the proposed deal by resident doctor staff in June 2026. NHS commissioners and providers should now update 2026/27 contracts, in line with this guidance.

2. This guidance sets out how commissioner allocations have been updated for the impact of the NHS pay awards and RD deal in 2026/27, as well as the impact on other areas of income and expenditure. It also advises how commissioners and providers should update contract values for relevant services and how integrated care boards (ICBs) and NHS trusts should reflect the impact of the pay awards and RD deal on income and expenditure as part of in-year financial reporting.

3. The AfC pay award was implemented in staff pay in April 2026 and applied from 1 April 2026. NHS Employers has published updated AfC pay scales for 2026/27 alongside an amended NHS terms and conditions of service (TCS) advisory notice. The pay award for DDRB was implemented in staff pay from June 2026, backdated to apply from 1 April 2026. Following this, resident doctors accepted a proposed deal in June 2026, including pay reforms which will be implemented in staff pay from September 2026 and backdated to 1 April 2026. NHS Employers have now published updated pay circulars for medical and dental staff, including the impact of the DDRB pay awards and the pay reforms in the RD deal. The 2026/27 pay award for ESM and VSM was announced in May 2026, and NHS England has issued an initial VSM pay circular confirming the award. Employers should not implement VSM pay award increases until a second pay circular is issued, which will set out eligibility for the 2026/27 award and provide formal confirmation that implementation may proceed.

4. The payments and contracts section of this guidance includes an updated NHS cost uplift factor (CUF) for commissioners and providers to refer to as appropriate when updating contract arrangements. The updated CUF in this guidance includes the estimated impacts of 2026/27 NHS pay awards and the RD deal for locally employed doctors. It is proposed that funding for all doctors in training will be distributed through the education and training tariff (see paragraph 17). The pay drift value within the pay component of the CUF has also been adjusted from 0.10% to 0.39% to recognise cost pressures relating to new or updated national pay-related policies. These include the impact of the job evaluation review process for AfC band 5 nurses, exception reporting for resident doctors, the new mechanism for calculating petrol and diesel mileage rates for staff using their cars for work, as well as the new Specialty and specialist (SAS) eligibility and permanency framework.

5. This guidance refers to the apportionment arrangements between ICBs and NHS trusts, where NHS trusts are apportioned to an ICB for the purposes of financial management and reporting. The basis for these arrangements is set out in the financial apportionment section of the ICB and system finance business rules.

Cash management

6. It is expected that ICBs will support any additional cash requirements associated with implementation of the RD deal in September 2026, including the impact of backdated pay from April 2026, for the NHS trusts in their system by processing a payment on account.

7. Commissioners and providers should work together to ensure that updated 2026/27 contract values are promptly agreed, with reference to the payments and contracts section of this guidance. This should ensure that the funding available for the estimated impact of the 2026/27 NHS pay awards and RD deal can be appropriately funded to providers through contract arrangements and thereby minimise the requirement for additional cash support from October 2026.

Allocations and other revenue

Allocations

8. Paragraphs 9-15 set out the adjustments that have been made to NHS commissioner allocations for the impact of the 2026/27 pay awards and RD deal. Allocations were updated for the impact of the AfC and DDRB pay awards through in-year reporting in Month 2, and for the impact of the RD deal and ESM and VSM pay award in Month 5. Adjustments will be processed as recurrent baseline adjustments in 2027/28 allocations, with the exception of the non-recurrent funding outlined in paragraphs 10-11. The Mental Health Investment Standard (MHIS) values that apply to ICB core programme and ICB delegated specialised allocations will be adjusted to reflect the relevant updates to both sets of allocations.

Services in scope of the NHS Payment Scheme

9. Adjustments have been made to the following allocations in 2026/27 to reflect the updated CUF set out in the payments and contracts section of this guidance (see Table 1) for all services in scope of the NHS Payment Scheme (NHSPS).

• ICB core programme allocations, excluding funding for obesity management drugs and the adjustment for the central technology licence arrangement.
• ICB delegated specialised services allocations, excluding high-cost drugs and devices.
• ICB delegated pharmacy, ophthalmic and dental services (POD) – funding for secondary dental services have been adjusted for the updated CUF, and 2026/27 ICB dental ringfence values have been updated accordingly.
• ICB SDF funding – where appropriate.
• NHS England direct commissioning programme allocations for retained specialised services, public health, armed forces and health and justice services.

Non-recurrent funding for the impact of NHS pay awards on non-NHS income

10. NHS England has issued additional non-recurrent funding to ICBs in 2026/27 to contribute to the impact of the pay awards and RD deal on the parts of NHS trusts’ cost base that are funded by other non-NHS income. This does not include income from education and training, services commissioned by local authorities and research and development (R&D), for which separate funding arrangements are set out in the other income and expenditure section below.

11. The additional non-recurrent funding has been calculated nationally and distributed based on the total pay bill for NHS trusts apportioned to each system. It is therefore issued on the basis of ICB financial apportionment, where ICBs receive the allocation for all NHS trusts apportioned to the system. This non-recurrent funding has been separately identified in ICB allocations. From 2027/28 onwards, NHS trusts will need to secure recurrent income from the relevant sources to manage the cost impact.

Primary care

12. The GP Practice and Network contracts have been updated for the AfC and DDRB pay awards as appropriate, and ICB primary medical care allocations have been adjusted to cover the estimated cost impact. Changes to the maximum reimbursement amounts for Additional Roles Reimbursement Staff (ARRS), including ARRS GP roles, have been set out in an update to the 2026/27 Network Contract DES specification. Similarly, the reimbursement rates for the new Practice Level GP Reimbursement Scheme include the DDRB pay awards, which are in the updated Statement of Financial Entitlements and supporting guidance.

13. The dental contract has also been updated for the impact of the DDRB pay award. ICB POD allocations have been adjusted to cover the estimated cost impact on primary and community dental services, in addition to the adjustment for secondary dental services referred to under paragraph 9 above. The 2026/27 ICB dental ringfence values have been updated accordingly.

ICB running cost allowance

14. The 2026/27 ICB running cost allowance (RCA) has been updated to reflect the impact of the 2026/27 pay awards. ICBs must ensure that administration spend for 2026/27 does not exceed the updated RCA. As of 2026/27, the RCA includes the administration funding for previous staff transfers to support delegated commissioning responsibilities. ICBs will need to transact any inter-ICB adjustments to appropriately fund the locally agreed operating model for delegated commissioning responsibilities.

15. The 2026/27 ICB cost of commissioning limits have also been adjusted for the impact of the 2026/27 pay awards, with the limit for 2026/27 increasing from £19.40 to £19.60 per head of population.

Other income and expenditure

16. Paragraphs 17-21 set out how the impact of the NHS pay awards and RD deal on other areas of income for NHS trusts is expected to be managed. Paragraphs 22-23 set out how the impacts of the NHS pay awards will be managed for NHS Blood and Transplant (NHSBT) services that are contracted by providers of NHS services.

Education and training

17. Final approved education and training (E&T) tariff prices will be published by the Department of Health and Social Care (DHSC) in due course, once confirmed by the Secretary of State, including the impact of 2026/27 NHS pay awards and the RD deal. For the RD deal, it is proposed that funding for all doctors in training will flow through adjusted E&T tariff prices.

18. The next Education Funding Agreement (EFA) payments to NHS trusts in October 2026 will reflect these increased costs using indicative E&T tariff prices. Any necessary adjustments to reconcile to the final approved E&T tariffs will be undertaken in future EFA payments.

19. The GP trainer grant for clinical and educational supervision of GP trainees has been updated for 2026/27, including for the impact of NHS pay awards. The updated 2026/27 GP trainer grant amount is set at £11,175.

Local authority commissioned services

20. DHSC published 3-year 2026/27 to 2028/29 local authority public health grant allocations along with the Local Government Finance Settlement earlier this year. The services commissioned by local authorities are not governed by the NHSPS and therefore NHS trusts will need to locally agree any funding for inflationary pressures related to these services. Where required, trusts should approach local authorities to agree any in-year contract changes in line with the terms of those contracts. The process for agreeing contract values will be a matter for local negotiation between both parties and should be made in line with the terms of locally agreed contracts. Updated local authority funding arrangements for public health services will be published shortly.

Research and development

21. The impact of 2026/27 NHS pay awards on R&D contracts held with the National Institute for Health and Care Research (NIHR) should be discussed and agreed as part of regular contract management discussions with NIHR. NHS England will not issue additional funding to NHS trusts for the impact of pay awards on R&D.

NHS Blood and Transplant

22. The 2025/26 pay awards: revenue finance and contracting guidance confirmed that NHS Blood and Transplant (NHSBT) charges for Blood and Specialist Services, agreed through the National Commissioning Group, were based only on a 2.8% pay assumption as an in-year measure only, and for 2026/27 the recurrent cost of the 2025/26 pay-related changes would be included in NHSBT charges to providers.

23. For 2026/27, NHS Blood and Transplant (NHSBT) prices will incorporate 2026/27 NHS pay awards, net of efficiencies, together with the recurrent impact of 2025/26 pay-related changes funded by DHSC on a non-recurrent basis in 2025/26. Providers of NHS services will be funded for the estimated cost impact of updated NHSBT prices in the updated NHS Cost Uplift Factor (CUF) set out in Table 1 in the payments and contracts section below, and in the prices workbook issued alongside this guidance.

Payments and contracts

24. An updated NHS cost uplift factor (CUF) is set out in Table 1, including the impact of 2026/27 NHS pay awards, the RD deal for locally employed doctors and other national pay-related policies referred to in paragraph 4. NHS England has published an updated 2026/27 NHSPS prices workbook, including updated low volume activity (LVA) values, reflecting the updated CUF.

25. Commissioners and providers should now vary the value of their contracts, where necessary, with reference to paragraphs 27-34 below. Local NHS leaders should work together to resolve any issues relating to contract agreement in a collegiate and timely manner. NHS England regional teams will track local progress and help organisations to resolve issues where necessary.

26. Commissioner allocations, as outlined in the section above, have been adjusted to fund commissioners for the annualised impact of the change in the net CUF on services in scope of the NHSPS, including for NHS and non-NHS providers.

Table 1: Updated 2026/27 CUF

Aligned payment and incentive contracts

27. For inter-system contract arrangements between ICBs and NHS trusts that are not apportioned to the same system and have a contract operating on aligned payment and incentive (API) arrangements, ICBs should minimise negotiations and expedite the flow of funding to providers by agreeing an adjustment to the value of the fixed element that reflects the updated net CUF in Table 1. API adjustments require NHS England approval (API rule 3 in section 4 of the NHSPS), and we confirm that all adjustments in accordance with this guidance are approved without the need to submit to NHS England. As the net CUF value is an annualised figure, ICBs should apply the updated net CUF to the total annual fixed element value to ensure that the backpay from 1 April 2026 and forward pay elements for the remainder of 2026/27 are appropriately funded.

28. For intra-system contract arrangements between ICBs and NHS trusts that are apportioned to the same ICB, systems may agree differential adjustments to the fixed element values to distribute pay funding to address pay pressures as they are understood locally, considering sector and trust-specific factors, without approval from NHS England.

29. The variable and blended elements of API arrangements between ICBs and NHS trusts should be updated to reflect the updated unit prices, backdated to apply from 1 April 2026 so that NHS trusts are funded for both the backdated and forward pay elements.

Contracts based on NHS Payment Scheme unit prices

30. Commissioners and providers with contracts operating on the basis of NHSPS unit prices should apply the updated 2026/27 unit prices, backdated to apply from 1 April 2026. Commissioners and providers may need to keep the financial reconciliation process under service condition 36 of the NHS Standard Contract open beyond the date by which all payments for the quarter would normally have been signed off for Q1 2026/27.

Contracts based on local prices

31. ICBs also have contracts with non-NHS providers that are based on locally agreed prices (see the local payment arrangement rules in the NHSPS). The requirement to adjust these contract values in-year for changes to pay costs will depend on the locally agreed terms of the contract. For example, where a contract stipulates that prices are to be adjusted for the impact of new inflationary pressures, such as the announcement of NHS pay awards or deals, or a change to the value of the net CUF, then ICBs should vary the value of the contract accordingly.

32. Some non-NHS providers employ some or all staff on AfC terms and conditions and will be directly affected by the AfC pay award. Where this is the case, ICBs may consider whether agreed local prices should be adjusted in-year to reflect the specific impact of the pay awards on the provider.

Low volume activity

33. The LVA values published in Annex A (tab 15) of the 2026/27 NHSPS have been updated, in line with the updated net CUF in Table 1, and are set out in the updated 2026/27 NHSPS prices workbook. ICBs should make all LVA payments to relevant NHS trusts in a timely manner, including where early payments have already been made and a further payment is now required for the differential value in the updated LVA values. Where the updated net CUF inflates any 2026/27 LVA values above the £1.5m threshold referred to in the NHSPS, these will continue to be treated as an LVA arrangement, so ICBs and NHS trusts are not required to agree contracts in these circumstances.

Contracts with NHS Wales

34. The approach to funding the NHS pay awards and RD deal in England is intended to be replicated in Wales to ensure that pay awards in both countries can be funded in cross-border relationships. Where NHS Wales commissioners arrange services with NHS trusts in England, payment values should be adjusted to reflect the new net CUF value in Table 1 and the updated 2026/27 unit prices. Similarly, commissioners in England arranging services with providers in Wales will be expected to fund equivalent uplifts when pay awards are announced in Wales.

Financial reporting

35. Commissioners and providers should ensure that updated 2026/27 annualised contract values are agreed promptly so that updated monthly payment values can begin to be paid from October 2026. Until updated contract values have been agreed, ICBs and NHS trusts should continue to report fixed and variable payments uplifted for the updated net CUF value set out in Table 1 to ensure that the impact of the pay awards and RD deal is appropriately reflected in reporting and to avoid artificial surpluses or deficits. Once contract values have been updated, organisations should reflect the revised payment values in their financial reporting. The financial impact of the 2026/27 pay awards and RD deal should be managed locally and not impact bottom line forecast outturn positions.

Queries

36. Queries related to this guidance which cannot be resolved through local discussion or discussion with the relevant NHS England regional team should be directed to england.finplan@nhs.net.

Publication reference: PRN02567