NHS capital

2024 Autumn Spending Review and allocations beyond 2025/26

The 2024 Autumn Spending Review provided the NHS with a 1-year capital settlement covering 2025/26. We are providing systems with allocations or indicative allocations that cover as many of the capital funding streams available in the year as possible, in parallel with the release of the 2025/26 planning guidance and this capital annex. Our aim is to better enable systems to develop high-quality, integrated capital and revenue plans considering their various requirements and resources in the round. We encourage systems to develop capital schemes that draw on multiple funding streams to deliver multiple objectives. We are also seeking to facilitate early approvals (where approvals are needed) to enable funding to be spent to best effect within the year. We are in general asking systems to set out how they propose to use national programme capital in line with the wider planning timetable and will aim to approve spending as soon as possible once plans are agreed.

The government has not yet awarded a capital settlement beyond 2025/26. However, we expect to receive a multi-year settlement as part of the 2025 Spending Review (Phase 2), which will conclude and be published in June 2025. Once the settlement is announced, we will develop and publish for 2026/27 and subsequent years covered by the settlement.

The government has agreed that systems can assume that they will receive at least 80% of their 2025/26 core operational capital allocation (see table below) in each year of this Parliament. This assumption is intended to provide greater certainty, enabling providers and systems to plan with confidence, accelerate investment decisions, and focus on delivering maximum value for patients and the public. The 80% level should not be taken as implying that we expect reductions in core operational capital in future years. We will be making the case on behalf of the NHS as part of the Spending Review process scheduled for 2025 in the usual way; but even within a flat or growing overall allocation, individual systems’ allocation may fall (or rise) as a result of changes in the underlying data driving the allocations formula.

Queries on this guidance should be sent to: england.capitalcashqueries@nhs.net

Overview of the NHS capital settlement for 2025/26

The 2025/26 NHS capital allocation will be split into 3 categories as follows:

1. A system-level allocation to fund day-to-day operational investments (£4.9bn)

These are traditionally either self-funded by organisations within integrated care systems (ICSs) or supported by the Department of Health and Social Care (DHSC) through normal course of business loans or system capital support via public dividend capital (PDC). As in previous financial years, this also incorporates £0.1 billion allocated for primary care estates business as usual (BAU) and GP IT investments. For the first time, this allocation also includes provision for international financial reporting standard (IFRS) 16. This means that systems have a single allocation within which to manage and prioritise operational capital. Systems will have the autonomy to determine the optimal deployment of this allocation, including the distribution between IFRS 16 and non-IFRS 16 operational capital expenditures.

2. Previously committed funds (£1.1bn)

These are to support previously committed and announced schemes from the previous Spending Review period, specifically the New Hospital Programme (NHP), Hospital Upgrades and the reinforced autoclaved aerated concrete (RAAC) programme.

3. Other national capital programme investments (£4.1bn)

These encompass key national priorities, including enhancing performance in elective recovery, diagnostics, urgent and emergency care (UEC), estates safety, advancing technology initiatives, supporting primary care, and driving progress towards net zero commitments.

NHS operational capital

Methodology for core system allocations 2025/26

The table below summarises the basis of allocations in 2025/26.

The table below sets out what expenditure is included and excluded from the system operational capital allocations in 2025/26.

As per previous years, any overspends against the final 2025/26 allocations will be deducted from 2026/27 capital allocations. This includes the effect of IFRS 16; this scores within system allocations and ultimately to the capital departmental expenditure limit (CDEL) in the same way as other CDEL expenditure.

Primary care – Business as usual (BAU) capital

The 2024 Spending Review provides £122m of capital funding to support primary care investments, including GPIT and premises improvement grants and integrated care board (ICB) capital requirements including IFRS 16.

Funding will be allocated to ICBs on a weighted population basis.

As in previous years, integrated care systems (ICSs) will have the ability to transfer capital into their primary care allocation from provider operational system capital but not from primary care to provider. Integrated care systems (ICSs) are expected to manage all primary care and commissioner capital requirements, including IFRS16 within their overall combined primary care and provider system capital allocation, transferring any capital into the NHS England mandate as required.

Continuation of finance business rules arrangements from 2024/25

To promote sound financial management and ensure equitable resource allocation, NHS England is proposing to continue the financial incentive scheme for ICSs from 2024/25. This scheme is aligned with the NHS’s broader financial framework and is designed to reward effective financial performance while encouraging systems to manage resources responsibly.

Under this scheme, ICSs are assigned a Revenue Financial Plan Limit (the “limit”), which sets the maximum allowable deficit or surplus they can plan for. These limits are based on national resource availability and local performance assessments. Systems that deliver financial performance in line with or better than their plan will receive capital bonuses, while those that underperform financially will face capital deductions. This approach ensures fairness by allocating resources based on population health needs and incentivises systems to manage their finances effectively.

The scheme applies specific capital adjustments based on financial performance. For systems with deficits exceeding their fair share allocation, a capital deduction of 15% of the excess is applied, although this deduction is capped at 10% of their core capital allocation. The remaining excess deficit, after deductions, is carried forward as a repayable amount in future years.

Conversely, for systems with deficits below their fair share allocation, no capital deductions are applied, provided they adhere to their financial plan.

Systems that achieve breakeven or a surplus receive a capital bonus equal to 30% of the difference between their breakeven or surplus position and the fair share allocation. These bonuses are not cash backed.

This structure continues to provide both incentives for strong financial performance and consequences for underperformance, supporting the NHS’s goal of sustainable financial management. The revenue finance and contracting guidance for 2025/26 sets out the full detail of the deficit recovery scheme and the consequences for systems. We propose that the scheme described above will operate in tandem with the financial freedoms and flexibilities described below.

NHS national capital programmes

Estates safety

The government has allocated £750m for estates safety in 2025/26 to address high-priority estate issues across NHS systems. This funding is intended to mitigate critical infrastructure and safety risks, addressing the poorest quality estates and ensuring a safe, sustainable environment for healthcare delivery.

Indicative allocations are being shared with systems to aid planning, and final allocations will then be decided centrally, based on the quality and strategic value of proposals received. These notional allocations should not be treated as guaranteed. Final funding decisions will be based on a thorough review of proposals, with flexibility to ensure national and regional priorities are addressed effectively. Once approved, funding will be issued as PDC.

Each system’s indicative allocation represents a proportion of the £750m based on need, taking into account levels of critical infrastructure risk (CIR), incidents and returns to the recent maternity estates survey. As the CIR risk significantly exceeds the funding available, we have used a cap and collar to help determine allocations. Systems will need to prioritise this funding between their organisations to deliver maximum safety benefits and submit a return, explaining how they came to those plans and outlining expected performance against safety-related metrics.

Systems are reminded that CIR funding cannot be used to substitute for their usual operational capital requirements; this funding is additive and intended to support strategic improvements beyond routine operational needs, and this should be reflected in increased investment in and eradication of CIR consistent with the funding allocated.

NHS systems are required to submit a standard template alongside their planning returns. Allocation template submissions can be made to NHS England ahead of plan submission for consideration and approval. NHS England will provide the template through regional teams. In the template, systems must outline the schemes they propose to fund within their indicative allocation, including scheme costs, expected benefits, and the type of CIR to be removed. This information should also be reflected in overall planning returns.

Systems are encouraged to prioritise works that address the most pressing infrastructure risks, including the mental health and maternity estate. There is no requirement for every trust within a system to receive funding. The evaluation process should ensure funding is directed towards schemes that represent the best use of resources and deliver demonstrable improvements. Submissions from systems will need to be approved by NHS England and DHSC.

In some cases, estates safety funding may be used to initiate larger multi-year schemes where this represents the most efficient and impactful approach. Systems should contact NHS England where they wish to consider using estates safety funding for multi-year schemes. NHS England is committed to enabling systems to plan effectively for 2025/26 by providing a clear view of the total available revenue department expenditure limit (RDEL) and capital department expenditure limit (CDEL) resources. Systems should align their proposals with their long-term objectives in their ICS 10-year infrastructure capital strategies, ensuring proposals contribute to sustainable improvements across their estates portfolio and investment in core estate.

Funded projects will be subject to monitoring to ensure delivery against agreed milestones and outcomes. Systems will be required to provide regular updates on progress, including demonstrating how their schemes have contributed to reducing the CIR and backlog, alongside other key metrics. Additionally, systems must show that CIR funding has been used in alignment with the objectives outlined in their proposals. This accountability is essential to maintain transparency and deliver the best possible outcomes from the additional £750 million CIR funding.

RAAC

Separate funding of £440m for RAAC hospitals has been identified for 2025/26 within the Autumn Budget (excluding whole hospital reprovision which is within the new hospitals programme). These funds are allocated to those trusts in the national RAAC programme on the basis of existing plans to undertake failsafe and eradication works and are subject to approval by the NHS England RAAC team of a satisfactory business case.

While 7 hospitals with RAAC that require full replacement have been transferred to the New Hospital Programme (NHP), they remain part of the RAAC programme with regards to the failsafe works.  Further advice will be provided to trusts where muti-year funding is needed for RAAC build projects outside of those included within the NHP. There is currently no ringfenced capital for RAAC for the period beyond 2025/2026; this will be considered as part of phase 2 of the Spending Review and confirmed when it concludes.

Constitutional standards recovery – diagnostics, elective recovery, UEC and cancer

The 2025/26 settlement includes £1.65bn for investments aimed at improving NHS performance against constitutional standards. £0.3bn of this funding will be allocated directly to relevant trusts via separate processes to be used to support ambulance priorities (£0.08bn), replacement of radiotherapy equipment (£0.07bn), CDC pathway productivity (£0.02bn) and diagnostics networks (£0.134bn). The remaining £1.35bn will be allocated to systems to support their progress towards achieving constitutional standards. This is split indicatively £0.33bn for electives, £0.45bn for diagnostics, and £0.58bn for UEC (including crisis and acute mental health provision).

Systems should first and foremost use the available capital to improve the efficiency and productivity of existing workforce and capacity – ensuring that their RDEL goes further.  Systems may then also fund the creation of additional capacity identified as needed to support progress to constitutional standards over the Parliament. This is provided they are confident of being able to fund the operating costs of the additional capacity when it comes on stream from within their RDEL allocations.

For electives, including relevant diagnostics, systems’ planned use of capital for 2025/26 should represent the essential first steps in their longer-term plans to deliver 92% performance against the 18-week referral to treatment standard.

Allocations approach

To enable systems to conduct integrated capital and revenue planning, NHS England has provided systems with indicative allocations of the £1.35bn. These allocations are not guaranteed and are subject to the outcomes of the planning process and subsequent approvals of individual schemes. They are based on a combination of population-weighted shares and national and regional intelligence on where investment is needed and can be delivered within 2025/26. Therefore, the allocations include funding to enable the completion of 2024/25 schemes and to expand or build community diagnostics centres (CDCs), surgical hubs, urgent treatment centres (UTCs) co-located with Emergency Departments and same day emergency care provision in those systems prioritised for these investments by national teams.

We will share with systems the basis of their allocations (including which schemes those allocations make provision for) to provide a starting point for their planning. Through the planning process, systems will need to work through how best to meet performance expectations within their CDEL and RDEL resources. In particular, systems will need to evidence that any additional capacity they wish to invest in is affordable from a revenue perspective. Arrangements for revenue funding are set out separately in the finance revenue and contracting guidance.

Systems may propose alternative uses of their indicative allocations that do not reflect the national and regional intelligence on which they were based but will need to be able to justify this alongside their planning return. The default is that if systems cannot identify the use of their indicative allocation, which meets the approval of national programme teams, undeployed funding will be returned to national programmes for reallocation to other schemes meeting the programmes’ objectives. Systems also have the flexibility by exception to propose some of the funding indicatively allocated for one of the programmes be used instead for another, but again, they will need to justify this alongside their planning return.

Core investment criteria

Systems should prioritise:

• performance impact – proposals must outline expected improvements in clinical or constitutional standards
• timely completion – schemes that can finish within 2025/26, whereas schemes extending beyond this must have future costs funded from local budgets
• revenue impact – projects must manage revenue costs, including PDC capital charges and depreciation within revenue settlements, focusing on productivity, efficiency and performance improvements
• revenue improving or revenue-neutral – any projects requiring increased capacity or workforce must demonstrate affordability within system plans

Planning process

Systems are asked to submit alongside their planning returns a standard template (which NHS England will provide via regional teams). In the template, they should set out the schemes they propose to fund from with their indicative allocation – and the costs and benefits of these schemes should be reflected in overall planning returns.

The template will collate scheme information detailing costs, performance impacts, delivery timelines and early funding needs. Regional teams will review these proposals as part of their overall consideration of planning returns, with a particular focus on RDEL affordability. National programme teams will also need to approve the proposed use of capital as an effective and deliverable means of delivering the programme objectives.

Organisations will need to secure business case approvals for schemes in the usual way, and trusts will have the flexibility to brigade multiple schemes into a single business case where that is more efficient. Business cases can be considered for approval starting in March 2025 but should not be submitted until all the requisite planning, design and procurement activity is sufficiently advanced and the scheme is ready for delivery.

Regional and national roles

As detailed above, regions will consider capital proposals as part of their wider role in assessing planning returns. They will also support systems to plan appropriately for scheme and business case development.

Once planning returns have been submitted, NHS England will convene regular approval panels to consider systems’ overall proposals and scheme business cases as and when they are ready. These panels will be nationally led with regional input. National teams and DHSC will oversee funding release and monitor progress to ensure coherence and deliverability. Funding will be issued as Public Dividend Capital, and organisations will need to report against delivery of the benefits set out in business cases.

Technology transformation

In the next financial year, we will allocate £596 million to drive digital transformation and enhance operational capabilities. This funding will support continued efforts to digitise frontline services, advance the adoption of the Federated Data Platform, and explore new use cases through a bid-based allocation process. Cybersecurity improvement funds will also be distributed through a competitive bidding framework.

Additionally, a further £400 million has been earmarked for technology initiatives aimed at improving productivity. Details on the eligibility and allocation criteria for this funding will be shared in due course.

Net zero

The NHS remains steadfast in its commitment to achieving its net zero ambitions and targets.  Systems should continue to ensure that all capital expenditure takes account of the impact on the organisation’s carbon emissions, local air pollution, and staff and patient health, as well as delivering the objectives set out in their green plan.

When undertaking capital procurement in relation to maintenance, repair or construction of NHS estate, purchasers should refer to Delivering a ‘Net Zero’ National Health Service, the NHS Estates Net Zero Delivery Plan (requires a FutureNHS log in) and, where there are implications for the fleet or fleet charging and fuelling infrastructure, the NHS Net Zero Travel and Transport Strategy. The NHS Net Zero Building Standard also applies to all investments that are subject to the HM Treasury business case approval process and that are at pre-strategic outline business case approval stage from 1 October 2023 onwards.

It is important that, as part of their green plans, all organisations have plans in place for heat decarbonisation through upgrading heating systems, insulation, and ventilation, as part of backlog maintenance where possible, and replacing less efficient lighting systems with LED lights. Systems should ensure that electric vehicles (EVs) or ultra-low emission vehicles (ULEVs) are considered when replacing vehicles in an organisation’s fleet, and lifetime operational costs should be considered in purchasing decisions, to ensure best value for the taxpayer.

For the 2025/26 financial year, NHS England and DHSC are working to secure capital to contribute, where appropriate, to the reduction of energy costs through the construction of renewable energy generation infrastructure, in line with the government mission to make Britain a clean energy superpower. A process to collate expressions of interest has already been opened to NHS Directors of Estates, with a particular focus on solar installations, including those with battery storage, which can be delivered by 31 March 2026. Expressions of interest with respect to EV charging infrastructure have also been invited. There is currently a deadline of 31 January 2025 for responses, with an expectation that any further application process will be clarified once funding has been confirmed, with implementation and outcome reporting set out shortly thereafter.

Trusts should note the Public Sector Decarbonisation Scheme (PSDS) also provides public sector bodies with grants to support estates decarbonisation. Preparation should be undertaken to support applications to both PSDS and other funding opportunities, across 2025/26 and the following financial years to build a pipeline of robust decarbonisation capital projects that can be quickly allocated funding as appropriate, when relevant opportunities become available.

Primary care – better utilisation

The NHS England Fuller Stocktake Report (2022), the Long Term Workforce Plan (2023), and findings from the Independent Investigation of the NHS in England (2024) have collectively highlighted the urgent need for capital investment to modernise an ageing and often inadequate primary care estate. This is particularly essential in light of the government’s commitment to shifting activity from acute settings closer to home – further detail on the government’s approach to delivering this will be set out in the 10 Year Health Plan currently being developed.

As part of their planning for 2025/26, systems are encouraged to continue developing their plans to adapting their estate to deliver the left shift. Systems can use allocations from the new Primary Care Utilisation & Modernisation fund, from BAU primary care capital and from wider system budgets to implement early next steps.

The Primary Care Utilisation & Modernisation Fund was announced during the 2024 Spending Review and provides new capital funding of £102 million to support improvements in the primary care estate. The fund aims to enhance the use of existing infrastructure, create additional capacity for the GP workforce, and increase the number of patient appointments available.

Funding is being indicatively allocated to integrated care boards (ICBs) on a weighted population basis as part of the national allocations planning process, with subsequent adjustments to ensure full fund utilisation based on scheme deliverability. Given the relatively limited availability of capital available in 2025/26, eligible projects include minor estates schemes focused on refurbishing or reconfiguring existing spaces to improve clinical capacity and productivity. The fund excludes technology solutions or the construction of new assets, emphasising the repurposing of underused spaces and adherence to NHS (GMS – Premises Costs) Directions 2024 and statutory standards.

Proposals should align with local ICS Infrastructure Strategies (2024), PCN Estates Needs Toolkit (2022-23) and prioritise high-quality, fit-for-purpose estate (classified as “core” or “flex”) over poorly maintained “tail” assets. Schemes must be deliverable by March 2026, and approval will depend on value for money and measurable patient benefits, including increased clinical appointments.

ICBs should note that no recurrent or non-recurrent revenue funding is included. Funding approvals will follow a streamlined 4-stage process. By 28 February 2025, ICBs must submit proposals prioritising investments from the PCN Estates Needs Toolkit and ICB Infrastructure Strategies, which will be reviewed for compliance and alignment with allocation limits. Systems will then receive feedback to refine or clarify proposals before progressing to detailed checks to ensure scheme compliance and light-touch business case reviews. Final approvals, requiring fairness and adherence to rules, will be granted by NHS England, with no funding committed until all approvals are complete. ICBs must also track progress and benefits, managing risks through a national tracker.

Mental health – reducing out of area placements (OAPs)

The NHS is committed to reducing inappropriate out-of-area placements (OAPs) for mental health patients due to the associated risks, including higher rates of suicide following discharge and the susceptibility of out-of-area care to a closed culture. All ICBs have published plans to localise inpatient care by 2026/27 under the national Commissioning Framework, improving both care quality and value for money. To support this, £75 million has been allocated in 2025/26 to assist systems and NHS-led provider collaboratives (PCs) in reducing one or more of the following:

• OAPs in acute care or psychiatric intensive care units (PICUs)
• mental health, learning disability and autism inpatient rehabilitation far from home
• placements outside natural clinical flow (ONCF) in adult and children and young people medium and low secure services

Systems will receive indicative allocations upfront, with final funding contingent on credible plans to eliminate one of the above types of inappropriate OAPs at provider or system level within a year where capital investment is the primary constraint. Proposals must outline trajectories for ending adult acute or PICU and secure care OAPs, alongside plans to localise inpatient rehabilitation. Investments will be assessed on measurable impact, revenue efficiency, and feasibility of completion by 2025/26. To ensure meaningful impact and value for money resulting from the investment, we do not expect to award funding to every system or PC. Indicative allocations reflect this and therefore provide figures only for some ICBs based on a regional and national assessment. Any system may still apply for funding if they can demonstrate alignment with the above criteria. 

The £75 million will be targeted towards acute and PICU OAPs (£46 million), rehabilitation (£16 million), and secure care (£13 million). Systems are encouraged to prioritise high-impact, cost-effective solutions, ensuring learning disability and autism (LDA) friendly design. This approach will ensure mental health services are delivered closer to home, meeting patient needs and improving outcomes.

Planning and oversight requirements for national capital programmes

For capital schemes under £25m, providers will be required to provide a Programme of Works template (for less than £10m schemes) or Short Form Business Case template (for £10m to less than £25m schemes), once they have a fully designed and costed scheme, but before contract signature to commence delivery. This Short Form Business Case template will follow the structure of the Five Case Model, with detail to be provided across the strategic, economic (supported by a value for money template), commercial, financial and management elements of a Green Book compliant case.

Providers should utilise the developed sub-£25m checklist (available from regional teams) to ensure that their scheme is sufficiently developed and mature and their business case covers the required content before submission to regional teams, including evidencing value for money. Cases are considered ready for submission when an agreed contractual cost is in place and all relevant design and planning has been achieved. A further key element of demonstrating readiness and viability is the affordability from a revenue perspective and value for money of the proposal.

Regional teams will act as the first line of assurance and approval. Once approved by regions, cases are submitted to the relevant national programme team, who will undertake their assurance before securing approval from their senior responsible owner (SRO), via an approval panel or programme board. Once this approval is secured, a memorandum of understanding will be set up to allow draw down PDC to deliver the scheme. The schemes will then be monitored through the Capital Reporting System and the Provider Financial Returns and reported to the Capital Delivery and Oversight Group (CDOG).

Trusts and systems should note the following requirements will apply across national programmes.

Where national programme funding is issued as PDC under a memorandum of understanding, trusts must ensure that drawdowns are not made in advance of need. Trusts must also ensure that, unless NHS England and the DHSC grant exceptional approval, the funds are used exclusively for the designated national programme scheme. Any changes to the intended use of funds or spend profile must be managed through the agreed national change request process. Accurate profiling and forecasting remain essential to support effective in-year use of programme funding and ensure best practice reporting of actual spend.

Trusts should consider the most effective procurement route in compliance with NHS England commercial guidance, including using only accredited frameworks. If trusts wish to deviate from national frameworks and compliance with NHS England’s commercial requirements, such as Procure 23, they should clearly demonstrate the benefits of doing so.

Modern methods of construction (MMC) is a core government and NHS policy when developing modern infrastructure. There is a requirement that MMC be used as the default on all construction projects. There is a national NHS target that any scheme over £25m will look to achieve MMC at 70% for new builds and 50% for refurbishments. Where there are exceptions, and targets cannot be achieved, a full and complete explanation and justification must be provided, including the options explored to attain the required target. These targets will be reviewed at business case approval stages. MMC should be adopted for projects below the £25m threshold where practical.

Progress on the delivery of outcomes and benefits from key national capital programmes are monitored monthly through the national Capital Delivery Oversight Group. The roll-out of the national capital reporting tool has now been completed. All estates schemes, which are part of a national programme delivered through PDC, must use this platform to report every month.

All the operational outcomes and benefits resulting from the capital investment must be recorded, including efficiencies, savings and reductions in risk. This will provide lessons learnt for future allocations and an evidence base to support future funding requests to HM Treasury.

Capital freedoms and flexibilities

To enhance the incentives for delivering strong revenue performance, NHS England is considering introducing adjustments to the capital regime that provide targeted freedoms and flexibility for high-performing systems and providers. We set out our proposals below and will be discussing them with colleagues across the system in the coming weeks. We will then confirm plans well before the end of the planning process. 

Importantly, these freedoms would be available exclusively to trusts and systems classified in tiers 1 and 2 of the NHS Improvement and Assessment Framework, ensuring that support is directed towards organisations demonstrating effective governance, strong financial management and operational resilience. The NHS Improvement and Assessment Framework replaces the Oversight and Assessment Framework. Proposals for this change were publicly consulted on in the spring. 

Proposal 1: Enhanced flexibility for high-performing systems

Systems in tier 1 and 2 that deliver breakeven or better positions (excluding deficit funding) in the prior year (in this case 2024/25) would be allowed to invest in capital expenditure (CDEL) above their allocated budgets over the current and subsequent year (2025/26 and 2026/27), using their available cash balances up to a limit we expect to set between £20m and £30m.

Proposal 2: Capital retention for high-performing providers

Providers in tier 1 and 2 that deliver a surplus in 2024/25 (excluding deficit funding) would have the flexibility to invest capital equivalent to their surplus in 2024/25, subject to system approval, over the financial years 2025/26 and 2026/27. This capital would have to be directed toward projects that demonstrably improve revenue outcomes.

These flexibilities would not be cash-backed as they are intended to enable organisations to draw on their surpluses. Organisations would need to review their cash forecasts as part of developing any plans to use capital flexibilities to ensure they are affordable in cash terms.  We would not expect to receive requests for either revenue working capital or for system capital support from such organisations.

NHS England would reserve the right to withhold a bonus if it appeared, based on past financial performance, that a system were deliberately manipulating funding flows to drive a surplus in one provider at the expense of others. While there would be no routine requirement for national approval of planned use of the flexibility, normal business case requirements would apply, and providers would need to inform the national team of any plans to use capital freedoms in advance. NHS England would reserve the right to amend the regime if necessary to ensure affordability in the round.

These flexibilities are designed to balance incentivising financial discipline and supporting strategic capital investment. By defining eligibility criteria objectively and linking rewards to demonstrable outcomes, this framework seeks to maximise system and provider engagement while minimising risks of gaming or unintended consequences.

Capital planning

As part of the 2025/26 financial planning process, NHS England will collect system and provider capital plans, and these should be completed in the following planning templates:

• provider – financial planning return (FPR)
• system – integrated planning return (IPR)

System and provider planning returns require the submission of 1-year capital plans that demonstrate compliance with the system operational capital allocations for 2025/26.

System and provider planning returns should also incorporate planned use of national programme capital allocations. Within their 2025/26 financial plan submissions, providers should develop their capital plans for national programme schemes based upon the indicative allocations notified as part of 2025/26 planning or upon previously agreed funding commitments and profiles as notified by NHS England.

Where possible, the system integrated planning return template will be pre-populated with the allocations or indicative allocations for system operational capital and national programme capital for 2025/26. When completing this template, systems should provide the total charge against the allocation for each component organisation – that is, all providers and the ICB.

Systems are expected to submit a fully compliant plan at full submission.

However, as with previous years, we will accept systems or regions over-programming by up to 5% of operational capital allocation value at plan stage in 2025/26, so long as this is based on a clear plan that allows elements to be scaled back or deferred if necessary. Over-programming against national programme capital allocations is not permitted.

The 2025/26 planning requirements for systems and their component organisations have been updated and this guidance should be read alongside the Revenue Finance and Contracting guidance for 2025/26.

Please also refer to the submission guidance for further details of the plan collections as part of the planning process and the submission deadlines.

International Financial Reporting Standard (IFRS) 16

Provider IFRS 16 CDEL budget

For 2025/26, there is no longer a separate IFRS 16 CDEL budget, and the overall provider operational capital budget includes CDEL cover for IFRS 16 requirements. This means no separate IFRS 16 allocations will be issued to systems, and IFRS 16 has already been taken into account when determining the provider core operational capital system allocations as part of the methodology outlined above.

This reflects the fact that NHS IFRS 16 spending scores to the same single parliamentary CDEL limit as all other NHS CDEL spending; trade-offs therefore inevitably need to made between IFRS 16 and other CDEL priorities, and systems are best placed to prioritise amongst requirements in their local area.

At plan stage, and during the year, provider and systems in aggregate will be monitored and expected to manage their operational capital expenditure against their total system operational capital allocations including the impact of IFRS 16. They will be able to decide how to best use their allocation and its split between IFRS 16, and non-IFRS 16 system operational capital expenditure. A modest contingency will be maintained centrally to address exceptional operational capital pressures; however, the default is that systems will need to prioritise within their allocations.

As with previous years, the 2025/26 provider planning returns have been designed to collect the required level of information regarding IFRS 16 and calculate a provider charge against system capital allocations, including IFRS 16. Therefore, systems and providers are asked to complete their returns on an IFRS 16 compliant basis and should refer to the relevant technical planning guidance for further information.

All new leases, lease modifications and remeasurements and other lease charges and credits within the scope of IFRS 16 will score against CDEL. The default position is that this applies to those transactions that are both internal and external to the DHSC group.

Providers and systems in aggregate will need to ensure the full impact of IFRS 16 implementation has been considered to ensure capital plans are prioritised and managed within the total system operational capital allocations.

Systems and providers are not expected to be separately monitored in respect of IFRS 16 expenditure. However, as part of our national reporting and monitoring arrangements, we will continue to monitor the level of IFRS 16 expenditure, as HM Treasury and DHSC have set the operational capital budget to include CDEL cover required for the impact of IFRS 16 application. This monitoring may also inform future spending review decisions.

Any overspends against the final 2025/26 allocations will be deducted from the 2026/27 capital allocations; this includes the effect of IFRS 16.

ICB IFRS 16 CDEL budget

In previous years, NHS England has received an uplift in the capital funding that flows to it through the mandate. This was used as far as possible to cover ICB IFRS 16 pressures, leaving systems to cover the remainder. This year, NHS England is including all available funding for ICB IFRS 16 pressures in system allocations, and it will be the system’s responsibility to manage those pressures within the available CDEL. This is to provide systems with greater certainty from the outset of the year, and given systems are best placed to make the trade-offs between these and other local pressures and priorities.

The IPR returns (06b ICB Capital tab) have been designed to capture the required information to inform the 2025/26 capital requirements for IFRS 16. ICBs are asked to complete their returns on an IFRS 16 compliant basis. NHS England will then arrange for capital mandate transfers to reflect the amount systems expect to spend on ICB pressures.

Overall, where providers and ICBs anticipate significant new lease and lease amendments within scope of IFRS 16 in 2025/26, these should be discussed with NHS England regional finance teams at the earliest opportunity. In addition, as the expenditure will score to capital budgets, providers and ICBs will need to seek approval for business cases that include lease expenditure that exceeds the delegated limits as set out in the relevant NHS England guidance. They must also ensure the required approval processes are factored into capital scheme timetables.  

Providers should refer to the latest guidance on capital investment and property business case approval for NHS trusts and foundation trusts.

For ICB capital expenditure relating to IFRS 16, approval is required in line with the limits in the NHS England Standing Financial Instructions. 

Joint capital resource use plan for ICBs and their partners

The National Health Service Act 2006, as amended by the Health and Care Act 2022 (the amended 2006 Act), sets out that an ICB and their partner trusts:

• must before the start of each financial year prepare a plan setting out their planned capital resource use
• must publish that plan and give a copy to their integrated care partnership, health and wellbeing boards and NHS England
• may revise the published plan – but if they consider the changes are significant, they must republish the plan; and if the changes are not significant, they must publish a document setting out the changes

To support ICBs in meeting these requirements of the amended 2006 Act, please refer to the Guidance on developing joint capital resource use plans 2025/26.

This joint capital plan guidance will cover the following:

• the overall funding allocations the system is assumed to be working to, with an explanation of assumptions (and related risks) associated with the assumed source and quantum of funding for the ICB and its partner providers
• how the system should prioritise available resource for investments in the ICS’s wider local strategic priorities and maximise efficiencies within an affordable allocation
• notable risks and contingencies associated with the capital plan, alongside any proposed mitigations
• detail of how ICB plans support cross-system working

In line with the amended 2006 Act, ICBs are required to prepare these plans before the start of the financial year (by 1 April), before then publishing and sharing the final plans, and reporting against them within their annual report.

Any further queries on completing ICB plans, not already covered in Guidance on developing joint capital resource use plans 2025/26, should be directed to england.capitalcashqueries@nhs.net

Depreciation

As in 2024/25, additional revenue funding will be available for depreciation and amortisation costs above nationally calculated system baselines. Arrangements for revenue funding are set out separately in the finance revenue and contracting guidance.

The 2025/26 baselines have been calculated based on 2024/25 baselines. System limits will not apply to the resource that systems can access for expenditure above their baseline. However, where systems have high levels of growth, they will be asked to substantiate their position against their capital position before resources are confirmed.

Indicative allocations for financial reporting purposes will be based on plan expenditure, and final allocations will be confirmed at year-end based on actual expenditure. ICBs and trusts may therefore need to adjust the fixed element of their Aligned Payment and Incentive (API) arrangement in-year to reflect a change in funding where actual spend differs from plan.

Cross system capital considerations

Capital allocations for trusts operating across system boundaries will continue to be made through a host ICS. However, it is vital to ensure that capital decision-making reflects the needs and pressures across all relevant ICSs, promoting fairness and efficiency. Key considerations include:

• equality in decision-making – ICBs must ensure that in-area and out-of-area patients are treated equitably when setting capital priorities. This ensures fairness in resource allocation and care delivery
• strategic investments in capacity – systems should prioritise capital investments that expand capacity for life sciences partnerships, such as commercial clinical trials. These projects can generate benefits not only for the hosting ICB but also for the broader NHS and the UK economy
• alignment across boundaries – NHS providers mapped to multiple ICSs must ensure their operational and financial plans align with the goals and capital plans of each system they serve. ICBs are expected to collaborate with these providers to facilitate alignment and reduce duplication of effort
• collective responsibility – capital planning must balance system-specific priorities with broader considerations, recognising the impact of decisions on services shared with other systems. Providers and systems must engage in joint governance to deliver financial stability and sustainable care models

By fostering collaboration and focusing on shared benefits, these principles will help unlock the potential of capital investments to deliver high-quality care and broader value for the NHS.

Land and property disposals and multi-year CDEL credits

Detailed guidance was issued in 2023/24. We remind systems and providers, they will need to notify NHS England at planning stage of the planned disposal, the proposal to carry forward any CDEL credit, and the resulting underspend against system allocations. If this is not possible, they will need to notify at the earliest opportunity in the financial year and, at the latest, in advance of the month 6 financial monitoring submission.

By including in plan submissions, or monthly monitoring submissions, this does not mean any carry forward of disposal credits are approved and can be assumed will be automatically provided in subsequent years. The formal approval will be sought from HM Treasury as part of the supplementary budget setting process undertaken every autumn, and a request will need to be made to DHSC and HM Treasury in October 2025, with a formal decision expected thereafter.

Further guidance is provided within the technical planning guidance. 

PFI and LIFT transactions

Trusts should notify NHS England at the earliest opportunity where there is a risk of a PFI or LIFT project terminating due to default of the Project Co party. Trusts should not enact any option to terminate a contract for Project Co default without the consent of NHS England and DHSC, who will advise trusts about the steps that need to be taken should this risk arise.

Voluntary termination of PFI or LIFT projects will only be considered in exceptional circumstances and where these demonstrate value for money and will require a Green Book compliant business case. Any proposal would need system support, including identified funding for any associated cash and capital or revenue consequences. Trusts considering voluntary termination of a PFI or LIFT contract should contact NHS England at the earliest opportunity. These transactions will be considered novel and contentious and require NHS England, DHSC and HM Treasury approval.

Trusts need to ensure they are aware of the expiry date of any PFI or LIFT agreements, key dates for decisions and any consequential financial costs, for example, payment for assets and condition review requirements. Where trusts are in PFI or LIFT facilities or other leased premises where NHS Property Services are the head tenant or freehold owner, these properties should also be captured in the ICB infrastructure strategies.

Trusts should additionally contact NHS England for advice about any proposed contract changes or settlement agreements that have the potential to impact on balance sheet treatment. Further guidance will be issued shortly.

s.106 – Developer contributions through town planning

Developer contributions support local infrastructure, including healthcare, through mechanisms like Section 106 (s.106) agreements and the Community Infrastructure Levy (CIL).

The CIL is a development tax adopted at the discretion of local authorities. Funds are allocated to infrastructure needs, including healthcare facilities, within the authority’s area. Once adopted, CIL charges are non-negotiable.

Section 106 (s.106) agreements are case-by-case agreements negotiated before planning permission is granted to address specific impacts of a development. Contributions must meet the following tests:

• necessary to make the development acceptable in planning terms
• directly related to the development
• fairly and reasonably related in scale and kind

S.106 funds are ring-fenced for purposes specified in the agreement. NHS organisations, while not parties to these agreements, may benefit from the funds. A formal agreement with the local authority may be needed to ensure spending aligns with the original s.106 terms.

NHS collaboration in planning

NHS organisations should collaborate with local planning authorities at all stages to understand and address the healthcare impact of new developments. NHS England and ICBs are statutory consultees for local plans. ICSs should consider these impacts in their infrastructure strategies and provide clear, coordinated responses to planning authorities.

Funding implications

Capital allocations do not cover additional facilities required due to housing developments. NHS organisations should work with local authorities to secure developer contributions for extra capacity. These contributions are additional funding recorded as a “credit” to capital departmental expenditure limit (CDEL), increasing spending power without reducing regular NHS allocations.

For more information on s.106 developer contributions please contact the national Estates team at england.estatesandfacilities@nhs.net

ICB infrastructure strategies

Infrastructure strategies have been produced in 2024/25, with feedback to be provided. Capital investments need to align these strategies, ensuring that the benefits laid out are delivered over the next 5 to 10 years.

As we now move into the delivery stage, we expect systems to refresh these plans in line with the outcomes of the 10 Year Health Plan, using the templates provided nationally. Updated strategies and supporting templates should be used to aid local decision-making. Further yearly interim national collections will be made in respect of the capital template that supports ICS strategies. In addition, trusts should put in place site development control plans aligned with system strategies. The next formal reiteration of these plans will not begin until 2028, retaining the 5-year rhythm.

For further information and support, please contact the national NHS Estates Strategy and Planning team at england.estatesandfacilities@nhs.net

Publication reference: PRN01629