1. This guidance sets out the revenue finance and contracting frameworks for 2025/26
(1 April 2025 to 31 March 2026) and should be read in conjunction with the 2025/26 priorities and operational planning guidance and the capital guidance for 2025/26.

2. For the purposes of this guidance, NHS trusts and foundation trusts are referred to collectively as “trusts”. “Systems” are defined as the integrated care board (ICB) and those trusts mapped for the purposes of financial apportionment (as defined in the ICB and system finance business rules).

3. This guidance refers to current proposals for how payments will operate under the rules set out in the 2025/26 NHS Payment Scheme (NHSPS). The NHSPS will be subject to a consultation published by NHS England alongside this guidance. All references to the NHSPS and the operation of payments in 2025/26 should be construed accordingly and may be subject to change following the conclusion of the consultation process. This guidance should be read in conjunction with the NHSPS once it has been published post-consultation to confirm the payment rules for 2025/26. This guidance may therefore be updated to reflect any changes to the NHSPS post-consultation.

Financial planning and in-year monitoring

4. Systems will continue to be the key unit for financial planning purposes. Each trust’s resource use should be individually and fully mapped to a single system. Its planned financial positions should only be included in that system’s plan but reflect the contract arrangements it has agreed with commissioners outside the system. As set out in the ICB and system finance business rules, all systems (including the ICB and partner trusts that are financially apportioned to the ICB) have a collective requirement to seek to achieve system financial balance, as well as a duty to seek to comply with system resource use limits set by NHS England. ICBs should ensure that the rules and principles in this guidance as well as the NHSPS (subject to consultation) are applied appropriately to all providers from which it commissions services, including in its inter-system contract arrangements with trusts in other systems.

5. ICBs and trusts should ensure that plan phasing is credible and realistic. Consideration should be given to bringing forward efficiency and productivity delivery to avoid plans that expect a significant amount of efficiency to be delivered in quarter 4 of 2025/26. Operational plans must be set consistent with the available resource, rather than the resource set to meet any specified goal. This means that any affordability challenges must be addressed in the initial plan and as part of discussions with NHS England.

6. The system financial plan submission will be the source of information for system plan assurance, ICB budget uploads and in-year financial monitoring. It will also be the primary source of information on trust income and expenditure, bottom-line performance, contracting, financial efficiencies and capital.

7. Trusts will continue to be required to submit organisational financial plans, which must be in line with their system’s financial submission. Trust financial plan submissions will be the basis for in-year financial monitoring and will profile key data to facilitate in-year monitoring. Trust plan submissions will also be used to assess the triangulation of system and trust financial plans with system activity and workforce plans.

8. Where a trust’s plan is inconsistent with its system’s position, the trust and system returns will both be rejected and their alignment and immediate resubmission will be requested. Systems will be required to co-ordinate the completion of board-approved planning templates across their system to ensure fully aligned system and trust plans are submitted by the deadline.

ICB and system finance business rules

Revenue financial plan limits

9. Updates were made to the ICB and system finance business rules arrangements in 2024/25 and communicated to ICBs in May 2024. The ICB and system finance business rules guidance has been updated to reflect these arrangements.

10. These business rules arrangements will continue in 2025/26 to support systems as they continue to recover their financial position. NHS England will set a 2025/26 plan limit for each system, reflecting the improvement required from 2024/25. As in 2024/25, a non-recurrent support funding revenue allocation will be issued to those systems with a deficit plan limit in 2025/26 that is equal to the size of the limit. Further information will be communicated to ICBs to confirm the 2025/26 plan limit for each system alongside publication of this guidance and, where applicable, 2025/26 planning submission templates will be pre-populated with the non-recurrent support funding revenue allocation for each system.

11. Systems are required to prepare 2025/26 financial plans that achieve the plan limit position (or better where achievable) set for the system. This means that every system must prepare a 2025/26 financial plan that achieves breakeven in their revenue position after the inclusion of any non-recurrent support funding revenue allocation where this is applicable.

Revenue and capital consequences

12. The 2024/25 business rules arrangements included in-year capital consequences for systems depending on the position of their plan limit, as well as capital and revenue consequences in future years depending on their final outturn position. The capital and revenue consequences for future years will be applied as set out in the deficit recovery scheme communicated to systems in 2024/25, and pre-populated in 2025/26 planning templates where applicable. In addition, NHS England is considering enhanced capital flexibilities in 2025/26 for systems that have delivered a breakeven position in 2024/25 (not including any income from support funding), as set out in the capital guidance for 2025/26. These capital flexibilities would be in addition to any capital bonus received as a result of the 2024/25 deficit recovery scheme.

13. It is proposed that the revenue and capital consequences in the deficit recovery scheme in 2024/25 will continue to apply in 2025/26. For ease of reference, these consequences are summarised in the paragraphs below and in Tables 1 and 2. The final details of the revenue and capital consequences in the deficit recovery scheme in 2025/26, as well as the capital flexibilities proposed in the capital guidance for systems that have delivered a breakeven position in 2024/25, will be confirmed and communicated to ICBs before the end of April 2025.

14. Where systems are set a deficit plan limit and receive support funding above their notional fair share of the support funding issued nationally (calculated with reference to the system’s target allocation for core programme allocations), a deduction will be applied to their core capital allocation in 2025/26. As in the 2024/25 scheme, the deduction will be equal to 15% of the difference between the system’s notional fair share and its deficit plan limit, capped at 10% of its capital allocation. Where the system delivers a breakeven or better position after the inclusion of the support funding, the net value of the support funding issued adjusted for any positive variance will be applied as an overspend to the system’s cumulative carry-forward position. This will be subject to repayment in future years, where the system has a cumulative overspend, in accordance with the repayment policy set out in the ICB and system finance business rules. Where the system does not deliver breakeven with the support funding issued, the aggregate value of the support funding and the variance will be applied as an overspend to the cumulative carry-forward position and be subject to repayment in future years.

15. Where systems are set a deficit plan limit and receive support funding below their notional fair share, the value of the support funding will not be included in the cumulative carry-forward position and not be subject to repayment in future years. This is on the condition that the system delivers breakeven in 2025/26 after inclusion of the support funding. Where a breakeven position is not delivered, the aggregate value of the support funding and the variance in the system’s outturn position will be applied as an overspend to the system’s cumulative carry-forward position and subject to repayment in future years.

16. Where systems are set a breakeven plan limit and therefore do not receive support funding, they will be given access to their notional fair share of the support funding issued nationally through a combination of in-year capital and future year capital and revenue bonuses. In 2025/26 the system will receive 30% of their notional fair share as an in-year capital allocation bonus. Where the system delivers the breakeven plan position in 2025/26, the system will have access to the remaining 70% of their notional fair share in 2026/27. The remaining amount, subject to being applied to the system’s cumulative carry-forward position, would be made available as a capital bonus (50%) and a revenue bonus (50%) in 2026/27. Where the system does not deliver the breakeven plan position, the variance in the system’s outturn position will be applied as an overspend to the system’s cumulative carry-forward position and subject to repayment in future years.

Table 1: 2025/26 proposed deficit recovery scheme capital consequences in-year

Table 2: 2025/26 proposed deficit recovery scheme revenue and capital consequences for future years

Repayment of cumulative system overspends from prior years

17. Where systems are due to repay overspends that relate to a period before 2024/25 (for 2025/26 that relates to the system carry-forward position at 31 March 2024), the full value of the cumulative overspend will continue to be subject to repayment on the basis of the ICB and system finance business rules (repaid over a 3-year period, subject to an annual cap set at 0.5% of the 2025/26 recurrent ICB core programme allocation).

18. Where systems have achieved a breakeven position in 2022/23 and 2023/24, any net historical clinical commissioning group (CCG) overspend will be written off. Those systems which did not achieve this will have any historical overspend reinstated and will be subject to repayment, in line with the arrangements set out in the repayment section of the ICB and system finance business rules guidance, with repayments starting from 2025/26.

19. Where repayments are due in 2025/26, these will be pre-populated in financial planning templates as a revenue allocation adjustment.

Access to drawdown of cumulative system underspends in 2025/26

20. Where systems have a breakeven plan limit and deliver this position in 2024/25, systems will have access to a revenue and capital bonus (after the bonus is applied to the system cumulative position), as outlined in the updated arrangements for 2024/25 (released in May 2024). The relevant revenue and capital bonuses will be pre-populated into system planning templates for 2025/26.

21. NHS England does not otherwise anticipate widespread access to drawdown of prior year surpluses in 2025/26 that are not related to 2024/25 revenue and capital bonuses. Requests for drawdown will be considered according to national affordability. For the purposes of financial planning, systems should therefore not assume access to drawdown unless this has been approved in advance of plan submission. Where drawdown is approved, this will be added to the relevant system financial planning template.

ICB revenue allocations

Overview

22. The 2025/26 allocation schedules, published alongside this guidance, set out the allocations, including the fair share (“target”) allocations, base growth and convergence for each ICB.

23. The cost uplift factor (CUF) for 2025/26 is 4.15%, and the general efficiency requirement is 2.0%. Further information on the CUF will be set out in the 2025/26 NHSPS consultation.

24. A consistent convergence policy applies across the ICB core programme, ICB specialised and ICB primary medical care. The convergence adjustment applied to an ICB depends on its distance from the target allocation. The maximum convergence for those ICBs outside 2.5% of their target allocation is +/-0.5%. The requirement is tapered such that convergence reduces as ICBs move closer to their target.

25. Where ICB funding is provided on a population basis, inter-system funding arrangements must consider patient flows and ensure all relevant funding is included in contracts. Where funding allocations are not provided on a population basis, this is clearly identified. Further information on the payment and contracting arrangements for 2025/26 is available in the contracts and payment approach section.

ICB core programme allocations

Baseline adjustments

26. The following recurrent adjustments have been applied to 2025/26 allocation baselines and are therefore subject to base growth and convergence.

• Pay funding issued in 2024/25 will be recurrently included in baselines.
• Items processed post-convergence in 2024/25 that have been moved recurrently into the baseline are:
• virtual and physical urgent and emergency care (UEC) capacity, including services that specifically support admissions avoidance and timely discharge. Recurrent funding included in core allocations in 2024/25 will be added to ICB baselines in 2025/26. This is in addition to the funding already included in ICB allocations to support timely discharge (£500m in 2024/25) that was announced in 2023/24. Further information on the latter is available in the Better Care Fund (BCF) section.
• ambulance capacity funding of £230m (£200m issued in 2023/24 plus £30m full-year effect issued in 2024/25) has been added recurrently to 2025/26 ICB core programme allocation baselines. As in 2024/25, each ambulance trust’s total funding has been added to its commissioning ICB’s baseline based on the weighted population of the ICBs. A separate schedule will be issued for 2025/26, which will only set out the required amendments to contracts to ensure that the allocation change has a neutral impact on ambulance trust income.
• adult long COVID services funding
• learning disability and autism funding transfer agreement (FTA) residual funding
• public health baseline re-set adjustments
• Any other recurrent allocation updates up to and including month 8 2024/25.

27. The following adjustments have been applied in 2025/26 after base growth and convergence.

• Service Development Funding transferred to allocations. Further information is available in the Service Development Fund section.
• Elective recovery funding (core and additional) has been separately identified in ICB allocations. Further information is available in the Elective recovery funding section. There is no additional funding available for elective activity beyond that included in ICB allocations.
• COVID-19 testing As in 2024/25, ICBs will receive fixed allocations for commissioning COVID-19 testing services for their populations, comprising PCR testing services and lateral flow device (LFD) hospital-based testing services as set out in the ICB core programme allocations section. The 2025/26 allocation has been calculated based on the 2024/25 allocation, uplifted to reflect inflationary growths (see CUF and general efficiency requirement). Payments should continue to flow to trusts through the fixed payment element of their aligned payment and incentive (API). The allocation continues to be based on the latest COVID-19 testing protocol published in March 2024, which remains valid at the point of publication of this guidance. Unless stated otherwise in superseding guidance, ICBs and trusts should plan based on the continuity of this testing protocol. Trusts continue to be encouraged to maximise value for money through procuring non-pay items (such as, reagents, LFD kits and swabs) through existing national framework arrangements.
• Central technology license arrangement adjustment. As in 2024/25, a funding transfer from ICB allocations for trust technology licences will be applied. The transfer will be calculated on the same basis as in 2024/25 as the cost saved by trusts on the licences is now covered by central licensing arrangements. A separate schedule will be issued, setting out the adjustment that ICBs should make to each trust’s API fixed payment value.
• Discharge funding. The 2025/26 allocation has been calculated based on the 2024/25 allocation of £500m. Further information is available in the BCF section.
• Roll-out of optical coherence tomography (OCT). A funding transfer of £7.2m in 2025/26 (£14.4m full year-effect) for ICB-commissioned ophthalmology services has been processed to NHS England commissioned public health services to reflect the roll-out of optical coherence tomography (OCT) to the post-screening pathway. Further information is available in the diabetic eye screening section.
• Charge-exempt overseas visitors (CEOV) and UK cross-border emergency care allocation adjustment. This adjustment is based on submissions from ICBs of the 2023/24 actual cost, updated for the 2025/26 CUF and general efficiency requirement. Further information is available in the CEOV and UK cross-border emergency activity section.
• Pay costs: Other income support. Non-recurrent support for pay-related pressures on the NHS provider cost base supported by non-NHS income.
• Corneal tissue services. A funding transfer has been processed from ICB core programme (£6.6m) and ICB specialised (£1.4m) allocations to reflect new commissioning arrangements with NHS Blood and Transport.

Base growth

28. Base growth has been set at 4.4% to reflect the following:

• the cost uplift factor (CUF) for 2025/26 of 4.15%, including a 2.8% headline pay assumption and the impact of other pay-related cost pressures on NHS services
• the general efficiency requirement of 2.0%
• the Clinical Negligence Scheme for Trusts (CNST) increasing by 4.6% (see CNST section)
• Better Care Fund (BCF) growth (See BCF section)
• affordable activity growth, excluding emergency ambulance services – further information is available in the emergency ambulance services funding

Convergence

29. A consistent convergence policy applies across the ICB core programme, ICB specialised and ICB primary medical care. Further information is available in the revenue allocations overview section.

Fair share (target) allocations

30. The formula that determines fair share (‘target’) allocations has been updated in line with the recommendations of the independent Advisory Committee on Resource Allocation (ACRA) and policy updates.

31. The main changes to the allocation target formula are summarised below, with further detail set out in the 2025/26 technical guide to ICB allocations:

• underlying data refresh, including latest populations
• improved estimates of the relative weighting of different model components (the mental health component, funded nursing care in the weighting for community services and a new primary medical weighting for some elements of primary care services funded through core services)
• introduction of a new patient-level model for primary care prescribing
• updated maternity services component using updated data and currencies
• updated adjustment for small and remote hospitals
• updated travel time adjustment for the community services model
• updated adjustment for the unavoidable finance costs of the Private Finance Initiative (PFI)
• updated values of the market forces factor (MFF) to reflect the 2025/26 NHS Payment Scheme

32. The allocation tool supports systems to understand the relative need at different place levels within their ICB. It can help ICBs allocate budgets at place or service level and target NHS resources towards reducing health inequalities.

ICB primary care allocations

ICB primary medical care allocation

33. ICB allocations for delegated primary medical care services are published alongside this guidance.

34. The allocations include recurrent funding for implementing the 2024/25 pay awards.

35. There have been no changes in policy relating to the calculation of the target formula for delegated primary medical care allocations. Therefore, updates to the target formula are limited to data updates. A consistent convergence policy applies across the ICB core programme, ICB specialised and ICB primary medical care. Further information is available in the revenue allocations overview section.

36. Implementation details and contractual payments for 2025/26 have not yet been published. For planning purposes, ICBs should assume the full increase in allocations is required to fund growth and contractual payment increases until the agreed details of payment changes for 2025/26 are published.

ICB pharmaceutical, ophthalmic and dental services allocation

37. All ICBs have delegated responsibility for primary and prescribed dental services, primary ophthalmic services and pharmaceutical services (POD services) as defined in the Delegation Agreement. ICBs should award contracts for all delegated primary care services for 2025/26.

38. The published allocations have been updated to reflect:

• pay funding communicated as recurrent for the 2024/25 pay awards
• access to LFD testing for people in the community who are eligible for NICE-recommended COVID-19 treatment and have symptoms will continue through the community pharmacy advanced service. For 2025/26, ICBs will receive a fixed allocation for the commissioning of this service. This allocation will be applied to the ICB POD allocation. Individual ICB allocations will be based on an annual forecast of costs incurred on this service up to month 8 2024/25.
• other recurrent allocation updates up to and including month 8 2024/25

39. As part of the Delivery plan for recovering access to primary care, there is a requirement to continue to deliver all aspects of Pharmacy First (community pharmacy services to provide a common conditions service and significant increases in contraception and blood pressure monitoring). Supplementary guidance covering 2025/26 will be issued on the payment terms and pass-through funding arrangements. For the purposes of planning, ICBs should not include income or expenditure on this service in their plans.

40. The use of POD allocation is subject to the rules set out in the ICB and system finance business rules – namely the duty to breakeven within the resource use limit. The utilisation of POD allocations remains subject to the additional rule that dental budgets are ringfenced (see ICB dental ringfence section).

ICB running cost allowance

41. Pre-delegation ICB running cost allowances (RCAs) covering 2025/26 have been updated to reflect the pay assumption and the impact of other pay-related cost pressures. As previously communicated, RCAs remain subject to a 30% real terms reduction per ICB by 2025/26. ICBs should continue to provide assurance on the delivery of this reduction.

42. The published figures do not include any allocation for the impact of delegation. ICBs will continue to separately receive additional recurrent RCA on a population basis to reflect the 2023/24 transfer of staff. ICBs are responsible for calculating and transacting any inter-ICB adjustments to appropriately fund the agreed operating model in 2025/26. For planning purposes, ICBs should not assume any income or expenditure in relation to the expected transfer of staff as a result of further delegation of services in 2025/26. NHS England regional teams should plan for the full year’s expenditure, with budgets to transfer adjusted in 2025/26 to account for the timing of staff transfers.

43. Separately identifiable RCAs – namely the 2025/26 published values (pre-delegation) and the recurrent 2023/24 delegation staff transfer funding (on a population basis) – will be provided. NHS England requires that ICBs do not exceed this combined RCA. These values should be considered a maximum, and any underspends in RCA can be used as non-RCA revenue expenditure.

Service Development Fund (SDF)

44. The government’s mandate to the NHS and the 2025/26 priorities and operational planning guidance set out the need for reform and productivity improvement to deliver on the government’s goals for the NHS. To support local systems to deliver, we are removing most ringfences that limit system flexibility.

45. For 2025/26, most SDF bundles will move into ICB core programme allocations subject to a reduction to support overall financial balance. Where funding has been transferred into ICB core programme allocations this is no longer ringfenced, and there are no additional performance requirements beyond those set out in the 2025/26 priorities and operational planning guidance.

46. Separate schedules, with an accompanying SDF technical guidance, will be made available to each ICB and will set out details of which funding has moved into ICB core programme allocations and which funding will remain in an SDF bundle. The technical guidance will include an explanation of the distribution of any funding transferred to ICB core programme allocations. The schedule will also identify where funding is non-recurrent.

47. The following funding distribution will be confirmed shortly:

• community diagnostic centres (CDCs) – further information is available in the CDC section

48. The main areas of funding which will remain in the SDF for 2025/26 are:

• Cancer Alliances
• IT and technology
• funding issued on a drawdown or reimbursement basis
• funding that has been allocated for a specific purpose by government departments, details of which are included in the accompanying SDF technical guide

49. Where funding remains in the SDF, ICBs must spend it on the purpose for which it has been allocated. Where SDF funding is not spent on its intended purpose this will need to be returned by ICBs at year end.

Specialised services

Delegation

50. In 2024/25, the commissioning of suitable and ready acute specialised services was delegated to ICBs in the East of England, Midlands and the North West regions. The NHS England Board agreed to delegate services recommended for delegation to all ICBs in England from 1 April 2025. The list of services suitable and ready for delegation to ICBs has now been finalised with 70 services in scope; 11 services have been added to the 59 services delegated to ICBs across 3 out of 7 NHS regions since April 2024. Specialised services which are out of scope of delegation will continue to be commissioned by NHS England.

51. Guidance and tools to support ICBs and trusts in moving to delegation arrangements are available on the Integrating Specialised Services within Integrated Care Systems workspace on the FutureNHS Collaboration platform, which includes a finance and contracting section or through NHS England regional teams.

Setting allocations for specialised services

52. NHS England will make allocations to ICBs for the relevant in-scope acute and mental health specialised services due for delegation on 1 April 2025. As in 2024/25, ICB allocations for specialised services in-scope for delegation continue to be set based on the GP-registered population in each ICB. Allocations for acute services are subject to a convergence adjustment towards the needs-based target allocation of each ICB.

53. The target allocation is calculated using a needs-based formula for acute specialised services, which is weighted to apply to the component of ICB specialised services allocations that relate to acute specialised services. Using a needs-based calculation in setting resource allocations is key to supporting the principle of equal opportunity of access for equal need, as well as supporting the reduction of health inequalities.

54. A consistent convergence policy applies across the ICB core programme, ICB specialised and ICB primary medical care. Further information is available in the Allocations Overview section. The convergence adjustment applied to each ICB allocation is calculated based on the relative distance of the ICB allocation from target.

55. Work is ongoing to develop a similar needs-based formula for mental health specialised services, which will be applied to ICB specialised allocations in future years in combination with the acute specialised services formula. This will not be implemented for 2025/26.

56. 2025/26 ICB specialised services allocations will include baseline adjustments for 2024/25 pay, as well as other recurrent allocation adjustments processed up to and including month 8 2024/25. In addition, a post-convergence adjustment has been applied to ICB core programme (£6.6m) and ICB specialised services (£1.4m) allocations to transfer funding to reflect new commissioning arrangements for corneal tissue services with NHS Blood and Transplant.

57. NHS England will retain allocations relating to services not in-scope for delegation and will be set on a hosted provider basis. As a result of any new nationally driven procurement exercises, mutually agreed adjustments to trust baselines may be required in-year to reflect any material service changes or transfers.

58. ICBs will receive additional elective recovery funding for delegated specialised services on a hosted provider basis (determined by the trusts apportioned to the ICB).

Planning and contracting

59. For ICBs in the 3 regions where delegation took place in 2024/25 (East of England, Midlands and the North West regions of England), the planning for delegated acute specialised services, including any delegated acute services that are newly in scope for delegation from 2025/26, will be in the relevant system planning template.

60. Where NHS England is delegating acute specialised services to ICBs in the remaining 4 regions from 1 April 2025, planning for the relevant acute services will be included in the NHS England regional commissioner’s template and be split at individual ICB level.

61.Planning for specialised mental health services in scope for delegation will be included in the NHS England regional commissioner’s template and be split at individual ICB level.

62. Before submission, all partners in each joint committee arrangement (NHS England and ICBs) will be required to agree and approve the specialised commissioning financial plan for the population-based services in scope for delegation.

63. For 2025/26, regions are encouraged to agree with ICBs that acute specialised services will be contracted within ICB-led contracts, with delegated services becoming the responsibility of ICB commissioners, and NHS England joining ICB contracts as an associate named commissioner in relation to retained services. Where delegated services are included in ICB-led contracts, there will be no need for further action to assign commissioning responsibilities.

64. Where delegated services are in NHS England-led contracts, and once delegation is confirmed through signature of a delegation agreement on or after 1 April 2025, NHS England will assign the commissioning responsibilities for the delegated services to each affected ICB. This will take effect through 2 actions:

• NHS England will issue a contractual notice to each ICB, confirming the detail of the services being delegated, as provided for in the delegation agreement
• NHS England will inform each affected provider in writing about which rights and obligations and which services and populations under the signed contract are now being assigned to which ICBs. Assignment of this kind is permitted at the commissioner’s discretion under General Condition 12 of the NHS Standard Contract

65. Single-service contracts for retained acute and mental health services will continue to be directly contracted by NHS England. Contracts for mental health provider collaboratives (MHPCs) are already in place until 31 March 2026, and the arrangement described above will be used to transfer commissioning responsibilities under these contracts to ICBs. As NHS England will then no longer commission any services in these contracts, the affected ICBs will need to agree a co-ordinating commissioner.

Payment for specialised services

66. For delegated services, NHS England will continue to align payment arrangements with existing arrangements for ICBs, including low volume activity (LVA). LVA values will be set for acute specialised services but not for specialised mental health services, which are subject to mental health provider collaborative arrangements during 2025/26.

67. Where services and payments are currently managed at a provider level and are best managed that way, and where there are limited standardised activity or data flows, NHS England regional teams will continue to work with a nominated lead ICB for each provider to develop ICB-level payment arrangements. NHS England will also work with the providers and nominated lead ICBs to develop currencies, data flows and guide prices over time.

Specialist top-ups

68. NHS England will continue to hold the funding and make payments for specialist top-ups, even where these relate to delegated services. The NHSPS consultation proposes that NHS England will pay top-ups to providers of specialised services as part of the API fixed payments, rather than some top-ups being paid on a variable basis.

High-cost drugs

69. Arrangements for excluded specialised high-cost drugs will be the same as in 2024/25. NHS England will continue to hold allocations, and reimbursement against opening provider income baselines will be funded by a central reserve for all specialised high-cost drugs. This central reimbursement by NHS England continues to apply to all specialised commissioning high-cost drugs spend, regardless of whether the drugs are used for services where NHS England has retained responsibility for commissioning or where commissioning responsibility has been delegated to ICBs. As set out in the NHS England high cost drugs commissioning list, most specialised high-cost drugs will be reimbursed on a cost and volume variable basis according to in-year reported trust expenditure data. A small number will continue to be reimbursed on a fixed payment basis which will be based on forecast spend in 2024/25 and projected 2025/26 savings opportunities. We will continue to consider financial initiatives that will incentivise faster realisation of savings opportunities and we propose to move some high-cost drugs from a cost and volume variable basis to fixed payment arrangements.

70. As in 2024/25, costs relating to hepatitis C and cancer drugs funded from the Cancer Drugs Fund (CDF) will be reimbursed in line with the actual expenditure trusts submit in-year. Drugs funded from the Innovative Medicines Fund (IMF) will also be reimbursed in this way. Where it has been agreed to separately fund treatment costs associated with specialised high-cost drugs, such as CAR-T treatment, NHS England will continue to pay for these.

71. It is imperative that drug data, particularly for those funded by the CDF and IMF, continues to improve. Payment will only be made to providers on the basis of expenditure that passes price validation exercises. Accurate data is critical to NHS England’s ability to exercise the Expenditure Control Mechanism should either the CDF or IMF exceed their annual budgets and ensures NHS resource is protected.

72. Trusts, ICBs and NHS England all have a shared obligation to work together to release efficiency savings through reducing variation, optimising medicines value and improving the adoption of and compliance with the best value products and frameworks. The use of reference prices for biologic medicines with significant biosimilar savings opportunities will be recommended from 2026/27.

High-cost devices

73. For 2025/26, existing reimbursement arrangements will continue; all NHSPS excluded high-cost devices funding for trusts in England, including formal managed service arrangements, will be managed on a national basis, outside contract baselines. The NHS England national specialised commissioning team will manage the monthly transactional process and reimburse trusts directly. Information will continue to be shared with NHS England regional teams, building on current processes.

74. Trusts will be reimbursed directly for any purchases made via the NHS England central procurement process with NHS Supply Chain (the visible cost model). Any device categories or specific products not available via NHS Supply Chain will be reimbursed directly based on the device patient-level contract monitoring (DePLCM) template. Trusts will not be reimbursed for DePLCM reported expenditure for devices that should have been ordered via NHS Supply Chain, where key data fields have not been completed or where pricing information is unclear.

75. Direct reimbursement for devices to non-NHS providers or the devolved nations will continue (as in 2024/25) to be managed by NHS England.

76. The second phase of the Specialised Services Devices programme will continue to focus on delivering price savings from national commitments and value-based procurement. Further opportunities to deliver wider system savings will come from improving the uptake of certain products.

Clinical networks

77. NHS England invests significant funding in provider-hosted or commissioner-led specialised clinical networks. These are planned as separately identifiable components within commissioner financial plans, and contracts are required to separately identify the value of this funding for each network.

Excess treatment costs

78. The Department of Health and Social Care (DHSC), via the National Institute of Health and Care Research (NIHR), has been responsible for the single system in place to assure and pay excess treatment costs for non-commercial trials in England that have been funded by specific funders. These funders are most typically NIHR or larger research charities, such as members of the Association of Medical Research Charities (AMRC). The single system covers studies into both nationally commissioned (including specialised services) and ICB commissioned services. Excess treatment cost payments and the management of associated queries are now via NIHR. Updated national guidance for researchers, funders and administrators has been published by DHSC.

Mental health provider collaboratives

79. All specialised mental health services in scope for delegation from 1 April 2025 are delivered by NHS-led provider collaboratives for specialised mental health, learning disability and autism services (MHPCs).

80. NHS England intends to delegate responsibility for commissioning the services provided by MHPCs to ICBs on 1 April 2025. As the contracts for these services were put in place until 31 March 2026, responsibilities will be assigned to ICBs on 1 April 2025 using the process described in the planning and contracting for delegation section.

81. Where MHPC boundaries are not the same as ICBs, NHS England regional commissioners and MHPCs have disaggregated baselines for these services to an ICB level.

82. MHPCs have the flexibility to review service provision and are encouraged to establish service models that treat patients closer to home and to make and reinvest savings locally. The scope of services covered by MHPCs has been extended during 2024/25 to include perinatal services and forensic children and adolescent mental health services (FCAMHS).

NHS England commissioned services

Vaccinations, screening and child health information systems (CHIS)

83. NHS England will continue to issue public health allocations to regional commissioners so that they can commission services that form part of the NHS public health functions (Section 7A) agreement.

84. Regional commissioners will continue to produce financial plans at an ICB level to support closer collaborative working between NHS England and ICBs on the commissioning of vaccination, screening and CHIS services. This information will be used to support the future development of ICB-level allocations.

85. Since 1 April 2024, healthcare providers of public health services have been required to report activity performed within standard contract monitoring to their commissioners. In addition to contract monitoring, this information will be used to support disaggregating contract values to ICB level to support the future delegation of services. Therefore, it remains imperative that providers are working to achieve full compliance with this contract reporting requirement.

Diabetic eye screening

86. The national service specification for NHS diabetic eye screening (DES) has been updated to include optical coherence tomography (OCT) in the digital surveillance component of the post-screening pathway. Incorporating OCT can improve sensitivity and specificity, preventing unnecessary hospital referrals. ICB allocations have been adjusted to reflect that upfront investment in the post-screening pathway will result in fewer referrals for hospital-based treatment. The ICB allocation adjustment is a part-year adjustment reflecting that OCT services are required to go-live by October 2025. A full-year adjustment will be actioned in 2026/27 allocations. The NHSPS consultation includes non-mandated prices for all DES services, including OCT, to support providers and commissioners in establishing cost-effective services across the full screening pathway.

Flu and COVID-19 vaccination programme

87. The policy and operational requirements of the 2025/26 flu campaign will be communicated in the annual flu letter, following agreement with government.

88. The government has accepted the Joint Committee on Vaccination and Immunisation (JCVI) guidance for a seasonal COVID-19 vaccination programme in spring 2025. The statement also provides a broad indication of cohorts for autumn 2025 and spring 2026. Funding for the COVID-19 vaccination service remains subject to government approval. This is expected to be after the financial planning process has concluded, so for the planning purposes, commissioners and trusts should not assume income or expenditure on COVID-19 vaccination services.

89. In line with government guidance, NHS England will no longer maintain surge readiness for COVID-19 from 1 April 2025. Funding to regional commissioners will therefore no longer include surge funding.

Health and justice

90. NHS England will continue to issue regional commissioners with allocations to commission health and justice services.

Armed forces

91. NHS England will continue to commission healthcare for serving members of the armed forces and their families registered with defence medical services, veterans’ mental health and prosthetic services. These services will be commissioned nationally.

Other revenue

Community diagnostic centres (CDCs)

92. Where there are existing CDC schemes in place, ICBs will be allocated revenue funding for establishing and delivering activity in 2025/26, based on plans agreed with NHS England. This funding will be fixed and included in allocations, meaning it will not be updated in-year or subject to a ringfence.

ICB CDC allocations

93. As in 2024/25, all approved CDC revenue funding will continue to be allocated to the ICB in whose geographical area the CDC is located, with the expectation that the host-ICB will pay the relevant CDC provider, regardless of a patient’s responsible ICB. The Who Pays? rules will continue to make clear that, until further notice, the agreed host-ICB of the trust-led CDC is responsible for paying the trust to provide the designated CDC services (regardless of which GP practice the patients attending the CDC are registered with).

94. ICBs must ensure appropriate contracts are in place with trusts for designated CDC services.

95. In 2026/27, NHS England intends to revert to a normal population-based method for distributing CDC funding to ICBs. The 2025/26 Secondary Uses Service (SUS) data – using the relevant CDC Organisation Data Service (ODS) site code to identify activity – will be used to review delivery in detail and will form the basis for setting future ICB population-based allocations.

CDC provider payment arrangements

96. Subject to the NHSPS consultation, NHS England intends payment arrangements for CDC activity to align more closely with those for equivalent activity carried out in a non-CDC setting. For 2025/26, NHS England intends that host-ICBs should pay for all CDC activity on a variable basis as part of the API rules. As part of the 2025/26 NHSPS consultation, it is proposed that:

• a new CDC prices tab will be added to Annex A
• while the variable element API rules should be used for all CDC activity, in some cases, there is also separate central CDC revenue funding provided to ICBs to cover specific and time-limited start-up and other costs. Where this is the case, this should be transacted through the API fixed payment as a non-recurrent adjustment.

97. Providers must also comply with all existing commissioning data set (CDS) requirements and ensure CDC activity is submitted to SUS using their unique CDC ODS code, as well as to the national programme via the national commissioning data repository (NCDR). Whilst providers should continue to record the responsible commissioner in SUS, payment arrangements remain as set out in Who Pays?, on a host-ICB basis for all activity undertaken by the CDC in 2025/26.

98. The national CDC programme team can be contacted at cdcprogramme@nhs.net

Education and training funding

99. Training placements will continue to be funded on an activity basis by reference to the healthcare education and training tariffs or local prices where agreed. DHSC will publish the education and training tariff for 2025/26 at the earliest opportunity. Where relevant, updated MFF values are available in the 2025/26 NHSPS consultation.

100. Education and training income and expenditure will continue to be collected using the following categories:

• postgraduate medical and dental
• undergraduate medical and dental
• clinical (non-medical)
• other (including education support and workforce development)

101. For planning purposes and to ensure a consistent approach, a set of assumptions will be provided for planning until the 2025/26 education and training tariff guidance is published.

Revenue support for capital

102. Funding will remain available in 2025/26 to manage the revenue costs from depreciation, public dividend capital (PDC) charges or other short-term revenue. Where available, this is to help mitigate short-term revenue affordability barriers to capital investment during the initial implementation period and until efficiencies or productivity benefits associated with the capital investment are fully realised. Further information relating to capital investment is also available in the capital guidance for 2025/26.

Depreciation and amortisation

103. As in 2024/25, additional funding will be available for depreciation and amortisation costs above nationally calculated system baselines. 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 explain how their expectations align with their capital position before resources are confirmed. A schedule of the 2025/26 system baselines will be issued alongside supplementary guidance.

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

105. System baselines will be built into planning templates. Funding will populate in ICB planning templates based on plan spend inputs. However, actual allocations will be dependent on actual spend and will be monitored throughout the financial year.

106. For this approach to work successfully, systems need to come together to plan their depreciation and amortisation expenditure and forecast effectively in-year against this plan position.

Public dividend capital (PDC) dividend relief for assets under construction

107. As set out in DHSC guidance, the relief is solely at the discretion of DHSC, in consultation with NHS England, and is targeted at large nationally directed schemes that create material revenue impacts for providers, such that trusts do not pay PDC before the asset is operational.

108. New Hospital Programme schemes are eligible for Assets Under Construction (AUC) PDC dividend relief. In addition, government has agreed that this relief will be applied to a further set of limited schemes. Where this is the case, the trust will have received a letter from DHSC confirming eligibility for AUC PDC dividend relief.

Payment and contracts

NHS Payment Scheme (NHSPS)

109. The consultation on the 2025/26 NHSPS provides details of the proposals summarised below. Subject to the outcome of this consultation, the 2025/26 NHSPS will come into effect from 1 April 2025.

110. The 2025/26 NHSPS will apply to all secondary healthcare – acute, ambulance, community and mental health. As in 2024/25, it will include rules for 4 payment mechanisms:

111. The normal arrangement for payment is that the provider bills the patient’s responsible commissioner for their treatment, as set out in Who Pays?. ICBs operating a joint contract with a provider may agree to “aggregate” their payments (so that 1 ICB makes payment to the provider on behalf of all the ICBs, with recharging between the ICBs). ICB-to-ICB recharging is only appropriate if all parties agree to this in a specific contract. It should not be used for non-contract activity payments or to circumvent LVA arrangements.

112. Where transactions are needed, they should be done in the most cost-effective way, for example, invoice payment file (IPF), and their volume should be minimised.

Proposals for the 2025/26 NHSPS

113. The 2025/26 NHSPS consultation proposes that commissioners should set payment limits for elective services, and all services paid for on an activity basis, where the planned value of activity is above £0.1m. The payment limit would apply to both NHS and non-NHS providers. Further details on this approach are set out in the 2025/26 NHSPS consultation; however a summary of the proposal is:

• providers and commissioners will agree and document a planned level of activity to be reimbursed on a variable or activity basis, expressed as a financial value – the notified payment limit
• the commissioner must, as a minimum, commission a level of activity that delivers their activity floor and the target RTT improvement, taking into account affordability – NHS England will seek assurance on commissioned levels of elective activity
• if provider and commissioner cannot agree a planned level of activity and financial value, the commissioner can set a payment limit for that provider
• the notified payment limit is the maximum amount the commissioner is required to pay the provider for variable activity
• for non-contract activity (NCA) arrangements, the commissioner can set a notified payment where the financial value is expected to be above the minimum threshold and the NCA provider has been notified of the limit
• NHS England will provide guidance on how commissioners and providers should work together to agree arrangements and manage funding flows in-year to reduce complexity and uncertainty

114. The proposed 2025/26 prices and LVA values are included in the 2025/26 NHSPS consultation. They have been calculated by updating 2024/25 pay award prices for inflation and efficiency (see CUF and general efficiency requirement) and adjusting for changes in CNST contributions. To support a better understanding of contract values as part of the exercise set out in the API section, the cost base for the proposed 2025/26 prices for accident and emergency, maternity and non-elective services has been increased with reference to the 2018/19 cost base resulting in an average 13% increase. Prices for some procedures in ENT and gynaecology have also been uplifted to encourage greater levels of activity and help increase activity to address waiting times for these services.

115. The 2025/26 NHSPS consultation proposes updating the data used to calculate market forces factor (MFF) values. To limit potential volatility from this update, the new values would be introduced over a 2-year transition and should be managed as part of the API fixed payment review.

116. During 2025/26, NHS England will introduce small-scale pilots to test new payment mechanisms to support NHS priorities. This will include encouraging the use of same day emergency care, virtual wards and urgent community response services as part of UEC services, and how to financially incentivise best practice. NHS England will also work with neighbourhood health teams, with the aim of reducing the length of stay in hospital to same day, out of hospital care or provider care closer to home. The findings from these pilots will inform future payment development.

Aligned payment and incentive (API)

117. Since the 2023/25 NHSPS came into effect on 1 April 2023, almost all secondary healthcare commissioned between trusts and NHS commissioning bodies has been subject to the API payment model. Activity is excluded from an API agreement where a low volume activity (LVA) arrangement is in place or a single specialised service is individually procured.

118. Under the API rules, trusts and commissioners need to agree a fixed element, based on funding an agreed level of activity other than for elective activity (covering most elective ordinary and day case outpatient procedures with an NHSPS unit price, outpatient first attendances, unbundled diagnostic imaging and nuclear medicine and chemotherapy delivery). The fixed element should include funding for all expected activity other than the variable elements. Further guidance on setting the 2025/26 API fixed payment is available in the 2025/26 NHSPS consultation.

119. For 2025/26, commissioners and trusts should review their fixed payments to better understand how their current contract values compare to the value of the activity being undertaken (or other locally established arrangements for quantifying the cost or value of services being commissioned). It is not expected that the full value of any identified differences in funding is reflected as an adjustment to 2025/26 contract values, but that it is used to inform contract discussions and areas of focus in future years.

120. For acute trusts, this will be supported by a national analysis comparing contract values with a calculation based on activity and unit prices (where these are available). This national analysis will need to be supplemented and adjusted to take account of local information and agreements. For other services, a suggested approach is included in the 2025/26 NHSPS consultation. To avoid destabilising trusts or commissioners, the full value of any identified differences in the funding of a trust should not immediately translate into a change to the fixed payment value. However, it should be considered when applying local efficiency requirements, including convergence or deficit reduction, MFF changes and activity growth. Such requirements should be considered together in aggregate, such as considering that convergence may moderate the impact of MFF changes on allocations, especially when convergence reaches it maximum or minimum level. Fixed payments should be set at a reasonable level for the trust and an affordable level for the commissioner. Where adjustments in fixed payment are agreed to be actioned over time, a clear plan should be documented on what changes are expected and when they will be actioned.

121. As described above, the 2025/26 NHSPS consultation proposes that commissioners should set a limit for the amount paid to providers for variable elective services above planned levels. As such, the API variable element would mean trusts are paid on a fully variable basis for elective services, up to the payment limit. The price paid by the commissioner is adjusted by the trust’s MFF value. Where the relevant criteria are achieved, elective activity best practice tariffs (BPTs) must also be paid. NHS England will pay applicable prescribed specialised service (PSS) top-up payments as part of API fixed payments.

122. The 2025/26 NHSPS consultation proposes introducing a new BPT to encourage greater use of outpatient procedures, where clinically appropriate. The BPT will apply to a focused set of services, aligned to Getting It Right First Time (GIRFT) Right Procedure Right Place (RPRP) programme. The RPRP BPT will set prices based on target proportions of outpatient procedures, rather than day case or elective.

Low volume activity (LVA)

123. In the proposed 2025/26 NHSPS, LVA arrangements apply to almost all trust–ICB relationships with an expected annual value below £1.5m. As well as this threshold, in deciding whether to set an LVA, NHS England will consider the proximity of the trust to the ICB, the value of the LVA compared to the trust’s overall income and whether the trust delivers specialised services. Other exceptions to LVA would be:

• services provided by ambulance trusts, including patient transport services
• non-emergency inpatient out-of-area placements into mental health services where these are directly arranged by commissioners
• elective care commissioned by an ICB to enable patient-initiated transfers of existing long-waiting patients under patient choice arrangements

124. The LVA payments schedule is published as part of the NHSPS consultation. To minimise the number of financial transactions, we recommend ICBs pay each trust identified on the schedule the calculated amount once any in-year updates have been made to reflect the impact of any agreed pay award, or by the end of quarter 2, whichever is sooner. Where LVA payments are made before the impact of any pay award, any required additional payments should be made in the month after the updated LVA schedule is published.

Activity-based payments

125. The activity-based payment mechanism applies to almost all activity delivered by non-NHS providers for services with NHSPS unit prices. Providers will be paid 100% of NHSPS unit prices, with MFF applied.

126. As with the API variable element, the 2025/26 NHSPS consultation proposs that commissioners should set a limit for the amount paid to providers for variable elective services. The limit will be based on a planned level of activity. For contracted activity, the level of activity should be agreed between the provider and commissioner, but the commissioner may set the planned level of activity and the associated payment limit. Commissioners should set a payment limit for all providers with an expected activity value over £0.1m, covering both providers with a written contract and for non-contract activity.

127. Where the whole contract is based on activity-based payments, convergence as a price efficiency is not expected to be applied.

Local payment arrangements

128. Activity not covered by 1 of the 3 payment mechanisms described in the section above is subject to local payment arrangements. This includes services delivered by non-NHS providers with no NHSPS unit prices. Local payment arrangements mean providers and commissioners locally agree an appropriate payment approach. The NHSPS rules require them to consider the NHSPS payment principles, cost uplift and efficiency factors.

129. Where local payment arrangements involve activity-based payment, commissioners should set a payment limit in the same way as the API variable element and the activity-based payment mechanism.

Commissioning for Quality and Innovation (CQUIN)

130. NHS England is proposing to continue to pause the nationally mandated CQUIN incentive scheme in 2025/26. This will mean that providers’ income associated with CQUIN achievement is not at risk, and they are not required to repay any amounts if they do not fully meet the CQUIN criteria. CQUIN funding will continue to be included in prices. The fixed payment must continue to include the 1.25% funding previously identified for CQUIN.

Contracts

131. From a governance perspective, it is important that fully populated contracts in the form of the NHS Standard Contract 2025/26 are put in place between commissioners (ICBs and NHS England) and each provider (NHS trusts, NHS foundation trusts and non-NHS organisations) covering at least the full financial year of 2025/26 and in advance of 8 May 2025.

132. Contracts for all commissioned healthcare services – other than primary medical services, primary dental services, primary ophthalmic services and pharmaceutical services – must be in the form of the NHS Standard Contract, regardless of the type of provider commissioned to provide those services. NHS England will publish the final version of the NHS Standard Contract for 2025/26 to enable contracts to be agreed and signed.

133. For contracts where payment is to depend on activity volumes, opening activity plans and financial values should be set at realistic levels and in accordance with any notified payment limit. This is important for providers because the monthly cash flow they receive (“on-account payments”) will be broadly in line with the expected profile of costs they will incur. Further detail about NHS contracting is set out in the contract technical guidance. It is especially important that, following an appropriate process under the NHS Provider Selection Regime and NHS England’s patient choice guidance, ICBs promptly sign their proposed contracts with non-NHS providers of elective physical and mental health services. Prompt contract signature by 8 May 2025 will ensure that such providers can continue, without any risk of interruption. This will make elective capacity available to the NHS to support efforts to reduce waiting times.

134. Further information on contractual arrangements for services where NHS England is delegating commissioning functions to ICBs is set out in the specialised commissioning section.

Collaborative commissioning

135. To minimise bureaucracy and duplication, it is important that commissioners continue to collaborate in setting up and managing their contractual arrangements with providers, with multiple commissioners often signing the same single contract with a large provider. Model collaborative commissioning agreements are available on the NHS Standard Contract webpage to facilitate this.

Contract agreement

136. Agreed contracts are an essential discipline to support effective delivery. The inability to promptly agree a contract is likely a sign that a system plan is not robust. Contracts should be agreed between commissioners and providers by 8 May 2025, and local NHS leaders must work together to seek to ensure this is achieved.

137. Regional teams will proactively monitor progress towards contract agreement and signature. Where there is a risk that a contract between a commissioner and a trust will not be agreed, the issues preventing agreement must be escalated to, and discussed by, the ICB chief executive (or for contracts involving NHS England as commissioner, the NHS England regional director) and the trust chief executive.

138. Where contracts between ICBs and trusts (whether within a region or across regional boundaries), or between NHS England and trusts, have not been agreed by the final deadline for plan submission, the affected organisations will be required to submit a single joint statement of the issues in dispute to the relevant NHS England regional director(s) of finance. The regional team(s) will work with all parties to resolve the dispute and, where required, will have access to expertise from NHS England’s national teams to clarify the application of relevant national rules and guidance.

139. In exceptional circumstances, the issues in dispute will be escalated by the regional director(s) of finance to NHS England’s national teams, who will then provide binding advice to the disputing parties. The expectation is that all contract disputes between commissioners and trusts will be resolved and all contracts signed no later than 30 May 2025.

Key financial commitments

Better Care Fund (BCF)

140. The BCF will continue in 2025/26. The policy framework and planning requirements for the BCF in 2025/26 will be published in due course. The overall NHS minimum contribution for 2025/26 will rise by 1.7% (£85m), and ICBs should spend the full amount of growth on increasing the minimum contribution to adult social care. This will result in a 3.9% increase to the NHS minimum contribution to adult social care, with the minimum contribution to NHS commissioned out-of-hospital services remaining at 2024/25 funding levels (0% growth). These allocations must be pooled into a Section 75 agreement alongside grants paid to local government.

141. The £0.5bn additional funding to support timely discharge will continue in 2025/26 and will be separately identified as part of ICB core programme allocations. This is the NHS component of the £1bn provided through the BCF to support timely discharge as set out in the Autumn Statement 2022.

Dental ringfence

142. The utilisation of POD allocation is subject to the rules set out in the ICB and system finance business rules – namely the duty to break even within the resource use limit. It is also subject to the additional rule that dental budgets are ringfenced and NHS England reserves the right to direct that any unused resources are used to improve dental access. Exceptionally, the unspent allocation may be returned to NHS England. A separate schedule will be issued setting out the ringfenced dental budget included in 2025/26 POD allocations.

143. For 2025/26 NHS England may agree to relax the dental ringfence (so that any underspends are retained locally) for ICBs which (i) deliver additional urgent care in line with the manifesto commitment, and (ii) improve dental access more broadly. Additional guidance will be issued on the opportunity to have the ringfence relaxed in 2025/26.

Mental health services

144. The government and NHS England remain committed to working towards parity of esteem between physical and mental health. ICBs will therefore be required to meet the Mental Health Investment Standard (MHIS) on the ICB core programme allocation, which for 2025/26 means that mental health spend must grow at least in line with base growth.

145. In line with the treatment of the SDF, mental health SDF will be moved into ICB core programme allocations in 2025/26 subject to a reduction to contribute to overall financial balance. There will be no performance requirements for this funding beyond those set out in the 2025/26 priorities and operational planning guidance, but MHIS targets for ICBs will be increased to ensure that the transferred SDF continues to be spent on mental health. MHIS targets will be updated during 2025/26 to reflect actual outturn for 2025/26, including for mental health SDF. The SDF transfer will include funding for Mental Health Support Teams (MHSTs). Continuing expansion of the Mental Health Support Teams to reach 100% coverage by 2029/30 is a key Government priority, and ICBs must ensure that existing teams are maintained and that they work with the national team to establish new teams in 2025/26. In 2025/26 ICB costs of both existing and new MHSTs will be funded from within the MHIS. NHS England will continue to fund training costs through WT&E. ICBs will continue to receive additional funding via SDF to pay for expansion of NHS Talking Therapies and Individual Placement and Support provided that their plan delivers a reasonable increase in the number of courses of treatment (for TT) or in-year access (in IPS) relative to 2024/25.

146. The NHS England Board has agreed that the commissioning of specialised mental health services will be delegated to ICBs in 2025/26, and as a result ICBs will be required to meet a specialised Mental Health Investment Standard (MHIS) to demonstrate that the delegated funding has been spent on mental health services. NHS England regional teams will work with ICBs to plan mental health spend for 2025/26 and spend against this delegated amount will be monitored via monthly non-ISFE (integrated single financial environment) reporting. The ICB delegated specialised services allocations schedule shows the value of the funding delegated to each ICB for mental health services in 2025/26, inclusive of base growth. Where spend is moved from specialised services into community mental health services as part of a shift to community and preventative services, this can be reported against the specialised MHIS. In line with the approach for all delegated specialised spending, ICBs must meet the clinical quality and output requirements set by NHS England.

147. Since MHIS spending was first independently reviewed in 2018/19, ICBs have made significant efforts to improve the accuracy of their reporting on mental health spend, which is reflected in the independent reviewers’ opinions. For 2025/26, we will consult on including MHIS spend as a note to ICBs’ accounts which will be considered by the financial auditors, and ICBs will only be required to commission a separate independent review if there are significant concerns about the accuracy of their reporting. The ICB’s Senior Responsible Officer for mental health will be asked to formally agree the note to the accounts and the content of the note must be discussed at a public ICB board meeting as soon as possible after publication.

Reducing temporary staffing spending

148. For many years, there has been a national programme focused on reducing the reliance on agency staff. This has included setting expenditure limits by system and reviewing agency usage as part of the wider NHS accountability and assurance framework. In recent years, this has supported the reduction in agency expenditure.

149. We will require systems to go much further to reduce agency expenditure in 2025/26, as part of the ambition to ultimately eliminate agency usage completely in the coming years. We will also require systems to reduce spending on bank staff. As part of this, systems should give particular consideration to agency and bank spend on administrative roles. A national temporary staffing dashboard and toolkits on the better use of substantive and bank staff are available to support systems to achieve these

Agency expenditure

150. Agency expenditure limits for 2025/26 will be set to require all systems to reduce their agency spending by 30% based on current spending (month 8 2024/25 forecast outturn) across all trusts financially apportioned to the system. This is a minimum expectation, and each system should develop plans for reductions beyond this, as part of an ambition to eliminate all agency spend in the coming years. This builds on progress made in 2024/25, with the current run rate showing systems (in aggregate) forecasting agency spending reducing by 29%.

151. System partners will have the flexibility to agree how the 30% savings are delivered, reflecting any variation between trusts. The outcome measure will be based on the full year spend position. Monthly financial returns will provide the basis for monitoring and should be used to agree remedial actions with NHS England regional teams where overspending is a risk.

152. Trusts should take action to reduce their use of NHS agency staff and achieve compliance with the agency staff rules and price caps. Trusts should continue to assess whether using the NHS Professionals’ national bank offering would help them to reduce agency expenditure further.

Bank expenditure

153. In addition to reducing (and eventually eliminating) agency usage, systems will need to take action to reduce bank expenditure. While systems are encouraged to switch essential agency usage to bank, there are still opportunities to reduce current bank spending in 2025/26 through reducing sickness absences, reviewing rates through collaborative working and switching from bank to substantive employment as part of making best use of the workforce.

154. Between 2019/20 and 2023/24, bank spending increased by 19% a year on average, up from 6.3% to 8.2% of total NHS trust pay spending. Systems are forecasting (in month 7 2024/25) to reduce bank spending in 2024/25, and they will need to build on this in 2025/26 to return to pre-pandemic levels.

155. We will set bank expenditure limits for 2025/26, aiming for systems to reduce current (month 8 2024/25 forecast outturn) bank spending by at least 10%. This builds on the progress made in 2024/25, with the current run rate showing systems (in aggregate) forecasting bank spending reducing by 8%. Systems should focus on eliminating bank usage for administrative roles, which currently accounts for around 10% of bank spending.

156. It is expected that bank rates should be minimised and aligned across systems to ensure they represent value for money and drive consistency.

Other planning assumptions

All-age continuing care

157. NHS-funded all-age continuing care can be arranged either through a personal health budget or care services delivered by a social care provider. Both of these commissioning arrangements support optimised care in the community. ICBs should locally, and in conjunction with their integrated care partnership (ICP), consider the sustainability of local social care providers. The ICB and the providers should engage constructively in planning services for those in receipt of all-age continuing care, using the rules for local payment arrangements as set out in the NHS Payment Scheme, and follow the NHS Standard Contract terms and conditions relating to prompt payment of providers.

158. ICBs should have a digital management system in place that complies with the information standard notice and dataset specification for the NHS All Age Continuing Care (AACC) Patient Level Data Set, which will go live on 1 April 2025. They should also have a digital transformational plan that enables a system-wide approach to data compliance. The data should be used to optimise resources, aid planning, monitor assurance standards and address unwarranted variation.

159. Government will announce the NHS-funded nursing care (FNC) rates for 2025/26 in due course.

Charge-exempt overseas visitors and UK cross-border emergency activity

160. Commissioners have a legal responsibility to commission services for charge exempt overseas visitors (CEOVs) and UK cross-border emergency care. They should provide the appropriate level of funding to providers through their commissioning contracts, as set out in the NHS Standard Contract. Information on determining the responsible commissioner for overseas visitor and UK cross-border activity can be found in Who Pays?

161. CEOV and UK cross-border emergency care allocation adjustments have been actioned (through the planning templates) to the opening 2025/26 ICB core programme allocations. This adjustment is based on submissions from ICBs of the 2023/24 actual cost, updated for the 2025/26 CUF and general efficiency requirement.

162. Accurate data collection of CEOV and UK cross-border emergency activity ensures that the allocation re-distribution is correctly informed. Providers should therefore use the Overseas Visitors Charging Categories (OVCC) in their patient administration system (PAS) to ensure this information is appropriately captured in the Secondary Uses Service (SUS). Commissioners should be regularly reviewing this information to ensure it can support the timely and robust completion of the annual data collection.

Clinical Negligence Scheme for Trusts (CNST) contributions

163. As in previous years, the growth in contributions to the CNST is funded in commissioner allocations on a uniform basis. The overall increase in CNST contributions to NHS Resolution in 2025/26 is 4.6%. However, the charge for each trust will be notified by NHS Resolution and reflect its relative risk factors.

164. The NHSPS consultation sets out proposals for how nationally published unit prices will be adjusted for the change in CNST contributions. It also includes guidance for commissioners and providers on the change in API and local payment arrangements to reflect average CNST changes in different specialties. As a minimum, commissioners need to uplift the fixed element relating to maternity using the maternity CNST uplift. This should also be done for all the other service areas but, if this is too resource intensive, an average for non-maternity service areas can be applied.

165. The cost of claims raised against ICBs (or falling on them through their commissioning contracts) for incidents since 1 July 2022 will be charged to them in CNST contributions. NHS England does not expect this will cause any material financial pressure in 2025/26; however, ICBs should ensure they are undertaking necessary due diligence when agreeing contracts, ensuring that commissioned providers have appropriate indemnity cover in place in line with the requirements of the NHS Standard Contract.

166. In addition to any claim charges, ICBs will continue to make a nominal contribution of £1,000 to NHS Resolution as part of their membership of the CNST. NHS Resolution will confirm the individual contribution required for 2025/26 to ICBs.

Elective recovery funding

167. Commissioners will continue to have access to elective recovery funding in 2025/26. Details on the payment arrangements for elective activity is set out in the NHS Payment Scheme section.

Allocation

168. Elective recovery funding in 2025/26 will be distributed as set out below. NHS England reserves the right to hold back the release of funding to ICBs where related to the under-delivery of elective activity in systems.

• Core elective recovery funding will be separately identified in ICB allocations and distributed on a fair share basis
• Additional elective recovery funding has also been separately identified in ICB allocations and is distributed on a targeted basis. The distribution will be based on the forecast outturn for 2024/25 (at M8) with some limited adjustments for the impact of TIF schemes coming onstream.

169. Systems must receive assurance that providers are accurately recording their elective activity and where any data discrepancies are observed, NHS England reserves the right to adjust elective recovery funding allocations in 2025/26 if final data is materially different to the forecasts on which the allocation is based or material data issues are identified.

170. NHS England, including those services to be delegated in 2025/26, will receive a proportionate share of funding.

171. To maintain stability and simplicity in the context of ICBs taking on delegated specialised services in 2025/26, all activity within the scope of specialised commissioning will operate on a host-provider basis for both NHS England commissioned and ICB commissioned delegated services. However, in a change from 2024/25, NHS England will manage the funding in relation to retained services, and a host-ICB will manage the funding for all specialised delegated services.

Elective activity targets

172. Commissioners will be required to achieve a 5 percentage point improvement in RTT performance (or 60% RTT performance, the higher thereof) alongside delivery of reform (for example, increased use of Advice and Guidance) and recovery of normal disciplines (for example, validation of the waiting list). As a guideline NHS England will set the elective activity (relative to 2023/24) that each commissioner is expected to deliver within the totality of funding made available.

173. The overall commissioner guideline can act as the default value for all inter-system relationships, subject to commissioners confirming affordability.

174. LVA activity will be excluded from the scope of the targets in 2025/26.

175. Payment for elective services that are subject to the NHSPS API variable element or activity-based payment should follow the quarterly reconciliation process set out in the NHS Standard Contract.

Emergency ambulance services funding

176. The 2025/26 ICB core programme allocations include funding for emergency ambulance services – defined as 999 call handling, hear and treat, and all face to face emergency ambulance responses (see and treat and see and convey) – based on 2024/25 funding levels, adjusted for CUF and general efficiency. As a minimum, this level of baseline funding should be protected in core emergency ambulance service contract values, with no convergence adjustment. This means ICB core programme allocations and contract value will not include any activity growth for emergency ambulance services.

177. Funding for activity growth in emergency ambulance services will be held by NHS England and issued to ambulance services subject to satisfactory agreement of plans and assurance of delivery. The indicative activity growth funding for emergency ambulance services will be pre-populated in planning templates and once NHS England has agreed the ambulance plan these values will be updated to reflect the final value.

178. As part of the planning process, NHS England will work with emergency ambulance trusts and their commissioners to agree a plan to deliver against a core set of metrics; these will include the number of hours on the road, clinicians in control rooms and the rate of hear and treat responses. Agreed activity growth funding will be issued in 2 stages, half at the start of the year following the agreement of plans and half on delivery of the milestones agreed with NHS England.

Inflation

178. The NHSPS sets out the basis for the inflation assumptions in the CUF applied to NHSPS payments and allocations, including relevant pay and non-pay assumptions.

National Living Wage

180. The CUF includes a generic headline pay growth assumption of 2.8%. This funding should be held by organisations until the pay awards are confirmed by government later in the financial year, with the exception that this funding can be used to fund the impact of the increase to the national living wage from 1 April 2025. The national living wage will be factored into the final 2025/26 pay awards, with an update to the CUF where required.

NHS Property Services

181. NHS Property Services will issue Annual Budget Schedules (ABS), based on the occupied space, between mid-January and the end of February 2025. These will provide an estimate of anticipated expenditure for the financial year ahead and include a line-by-line breakdown of property charges, with a comparison to the prior year budget and an explanation of any material variations. The 2025/26 ABS should be used as the basis of planning where possible.

182. For planning in advance of the receipt of the 2025/26 ABS, the following assumptions, based on local knowledge, would be suitable across these main cost categories when applied against the 2024/25 ABS and considering the nature of the occupation, whether or not that is documented:

• freehold rent is based on market values in 2016/17, subject to any contractual rent reviews
• leasehold rent (including PFI) will vary according to contractual arrangements with the superior landlord. In a small number of cases, the costs are contractually linked to RPI indexation, so the respective ABS are not issued until March or April, so they include the appropriate RPI value
• business rates are set by the Valuation Office Agency (VOA). Assume any increase as set out by the VOA, and any outstanding change requests to the rateable value will be adjusted in-year if approved by the VOA
• facilities management (FM) and services charges (SC) are mostly delivered by NHSPS employed staff, and therefore a pay inflation assumption should be applied
• utility charges are negotiated at scale by NHS Property Services using a dynamic sourcing strategy and therefore a local assumption on the likely rate of energy inflation should be applied

183. After issuing the 2025/26 ABS, NHS Property Services customer teams will reach out to meet and discuss them in more detail. This provides an opportunity to discuss the ABS, the space attributed, the level of service and any required new or changed services. In addition to price increases or decreases, the ABS may include volumetric changes that must be agreed. To ensure the best value for money, and in addition to the national NHSPS value programme, NHS Property Services can work jointly on local value and cost efficiency opportunities. Some examples of these can be found on the case studies section of the NHSPS website. All NHS Property Services customers have a designated primary contact who can be contacted at any point during the year to discuss current or future charges, and actions or decisions that can be taken locally to deliver more value from the estate.

184. At the end of 2025/26, an estimated annual reconciliation statement will be provided as part of the Agreement of Balances (AOB) process and to support any accruals. A final annual reconciliation statement will be provided during quarter 1 of 2026/27 to adjust for the actual difference between the budgeted (2025/26 ABS) billed amounts and the actual 2025/26 cost. More information is available on the property billing support section of the NHSPS website.

Community Health Partnerships

185. ICBs and providers should work with Community Health Partnerships (CHP) to optimise the use of the Local Improvement Finance Trust (LIFT) estate to maximise overall value for money. All CHP tenants have a dedicated portfolio manager, supported by a regional director, who can be contacted at any point during the year to discuss current or future charges and actions or decisions that can be taken locally to deliver more value from the estate.

186. In planning for the costs of NHS LIFT schemes in 2025/26, systems should take into consideration the terms of leases and other agreements with CHP, which are generally predicated on the retail price index (RPI). CHP will engage with tenants in quarter 4 2024/25 to confirm 2025/26 charges through the issue of the annual budget statement, with year-end reconciliation statements issued as soon as possible after the end of the financial year.

NHS pension employer contribution rate

187. The transitional approach operated since 2019/20 for employer contributions will continue in 2025/26. From 1 April 2025, an employer rate of 23.7% (23.78% inclusive of the administration charge) will continue to apply; the NHS Business Service Authority will continue to collect only 14.38% from employers, and organisations should plan on this basis. Central payments will continue to be made for the remaining 9.4%.

188. Employers should ensure that their payroll provider continues to apply an employer contribution rate of 14.38% for 2025/26.

External income

Non-NHS commissioners

189. Trusts should agree contracts with all non-NHS commissioners based on the appropriate funding for services in 2025/26, including inflationary uplifts for 2024/25 pay. They should also have an agreed approach to 2025/26 pay, which ensures once government responds to the recommendations of the 2025/26-related pay review bodies, contracts can be updated accordingly.

Local authorities

190. The 2024/25 public health ring-fenced grant circular, published 17 December 2024, updated grant allocations to include the additional in-year cost impact of the NHS pay awards for health services commissioned by local authorities and funded through the public health grant. For 2025/26, NHS trusts will therefore need to secure recurrent funding relating to 2024/25 through agreed contract values with local authorities, in line with the terms of those contracts.

191. DHSC will publish 2025/26 local authority public health allocations in due course, which include assumptions for pay which are consistent with those used for the NHS CUF. Once government responds to the recommendations of the 2025/26-related pay review bodies, trusts should approach local authorities where required to agree any contract changes in line with the terms of those contracts.

NHS Wales

192. Contracts between NHS Wales and English trusts should have regard to the NHSPS CUF, appropriate activity growth assumptions and the cost of services funded on a population basis in addition to NHSPS unit prices (specifically in relation to COVID-19 testing services). Payment arrangements should comprise either activity-based payment (based on NHSPS unit prices) or API contracts (including both the fixed and variable elements). Similarly, English commissioners using Welsh providers will be expected to fund equivalent uplifts to those used by English trusts.

193. It is important that waiting list parity is maintained between English and Welsh patients. Due to the variation in the monetary value of the cross-border agreements and the services commissioned, agreeing contracting baselines and any additional elective recovery activity will be locally determined on an individual commissioner and trust basis.

Chargeable overseas visitors

194. Providers should continue to have regard to the mandatory requirement to identify overseas visitors accessing relevant services and to collect payment upfront for any chargeable patient not in need of urgent or immediately necessary care, unless an exemption applies, as outlined in the DHSC guidance for NHS service providers on charging overseas visitors in England. Activity should continue to be billed to the chargeable overseas visitor (COV) using the NHSPS or locally agreed unit prices. Systems should ensure that they have visibility of cost recovery as providers work to improve identification and cost recovery processes, as set out in Service Condition 36 of the NHS Standard Contract.

195. The episodic risk-share charging rules for chargeable overseas visitors (COV) were replaced in 2023/24 by the shared risk of non-payment being set on an annual basis through the fixed element of API contracts. When agreeing the arrangements of their shared risk of non-payment, trusts and commissioners should consider the level of funding within their prior year fixed payment, the historical rate of non-recovery of patient charges and an agreed rate of income recovery improvement.

Cash regime

196. NHS England will issue ICBs with an annual cash drawdown limit as part of the overall group cash mandate.

197. ICB cash drawdown should be for payments required for the month of the drawdown and will continue to be monitored against the cash drawdown requirement (CDR). Accurate cash forecasting remains important as ICBs are encouraged to keep cash balances low but sufficient to cover committed outflows.

198. Commissioners will continue to pay providers on the 15th of the month (or closest working day), which will maintain the efficient flow of cash. The primary payment method for transactions from NHS commissioners to NHS providers will remain invoice payment file (IPF), with limited use of invoices and payment requests. NHS England expects that trusts will continue to have sufficient cash resource to meet working capital requirements without the need for further cash support. This will support prompt payment for goods and services received. In instances where trusts may need revenue cash support, the principles remain as set out in the DHSC guidance on financing available to NHS trusts and foundation trusts. This guidance confirms that revenue support is available in exceptional circumstances via the issue of public dividend capital (PDC). The issuing of PDC may have conditions attached that require confirmation that trusts have robust measures in place on cost and cash controls, alongside evidence of management of unplanned expenditure. However, efficient transacting with systems should ensure that requirements are kept to a minimum. Alternatively, within a system where a trust has a revenue or working capital cash need, DHSC can facilitate cash transfers between trusts within that system. This mechanism enables a trust to repay PDC to DHSC. Once repaid, DHSC will re-issue that PDC to another trust. Cash funding transfers must only be transacted via PDC and not made directly between trusts.

Further advice and support

199. Frequently asked questions (FAQs) will be issued on a regular basis to ICBs and trusts through FutureNHS and the Provider Financial Monitoring System (PFMS) portal.

200. For further queries on the financial and contracting arrangements, please contact:

• Financial planning process and templates – england.finplan@nhs.net
• NHS Standard Contract – england.contractshelp@nhs.net
• NHS Payment Scheme – england.pricingenquiries@nhs.net
• Revenue allocations – england.finplan@nhs.net
• Capital and cash – england.capitalcashqueries@nhs.net

201. For any other query on the financial arrangements, please email england.finplan@nhs.net

Publication reference: PRN01627