Average GP practice could face £15,000 hit from national insurance hike

An average GP practice could face a financial hit of around £15,000 from the national insurance increase introduced by the government from next year, accountants have warned.

GP funding (Photo: JH Lancy)

The warning comes after the government set out plans to invest an extra £36bn in health and social care over three years from 2022/23. The plans will be funded by a new 'health and social care levy', which will be introduced initially as a 1.25 percentage point national insurance hike from April 2022.

Unless GP contract income is increased to reflect the increase, practices face paying thousands of pounds more in employers' costs each year - in addition to higher contributions for individual practice staff, salaried GPs and partners.

Across England, practices could face additional costs of close to £50m in employers' contributions to cover the national insurance hike - around £7,500 per average practice - specialist medical accountant Andrew Pow of Mazars LLP told GPonline.

GP practice costs

Partners will also have to pay the extra national insurance on their own income. With average income per partner of around £120,000, a five-partner practice could face an additional £7,500 in national insurance costs that would come out of profits on top of the increased employer contributions - taking the total hit per practice to around £15,000.

Financial losses to GP practices from the national insurance rise are set to add to extra costs triggered by the 3% NHS pay rise announced earlier this year - which could add £20,000 to the average practice wage bill.

Practice employees, meanwhile, will also lose out from the higher national insurance rate - seeing the 3% NHS pay rise eroded substantially through income tax on the rise plus the 1.25% national insurance hike.

Mr Pow explained that practices spend around £60-£70 per patient on staff costs, meaning that across England the national insurance rise of 1.25 percentage points could trigger between around £49m and £57m in increased employer contributions.

GMS contract

'You would hope that the GP contract gets an uplift to cover the increased employer contribution,' Mr Pow said. If not, he warned, partners could face a drop in income from the combined extra costs of awarding the 3% pay rise and the impact of the national insurance increase.

Concerns over extra costs from the national insurance rise come less than two months after the government announced a 3% NHS pay rise backdated to the start of 2021. Practices offering the rise to their staff will have to pay for it out of existing contract funding, because the government has said multi-year pay deals such as the five-year GP contract will not be uplifted to reflect it.

Under the five-year GP contract deal that began in 2019, general practice is in line for a funding increase in 2021/22 of just 2.1%.

Senior GPs warned at the time that the way the pay rise had been implemented was 'divisive', and that it could further undermine partnerships at a time when numbers of GPs in partnership roles remain in rapid decline.

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