Government funding provides welcome boost to community pharmacies, but how will it impact your pharmacy?
1 Apr 2025
After years of financial pressure and funding stagnation, community pharmacies in England have finally received a long-overdue boost.
The recent agreement between Community Pharmacy England, NHS England, and the Department of Health and Social Care (DHSC) represents the largest uplift in funding across the whole of the NHS.
So, what does this actually mean for your pharmacy?
A snapshot of the new settlement
The funding agreement includes several core changes for the financial years 2024/25 and 2025/26:
- Annual baseline funding for 2024/25 rose to £2.698 billion and will increase to £3.073 billion for 2025/26
- An additional £215 million will support Pharmacy First and other Primary Care Recovery Plan services
- A £193 million write-off of historic margin overspend
- An increase to the Single Activity Fee (SAF) from £1.27 to £1.46 per item
- The annual margin allowance for the Community Pharmacy Contractual Framework will rise to £900 million
- Enhanced service fees and new payment bands for Pharmacy First
- Further additions to commissioned services, including antidepressants in the New Medicine Service (NMS) and Emergency Hormonal Contraception in the Contraception Service
Taken together, these changes represent a greater than 30 per cent uplift in funding compared to 2023/24.
Small steps, but a promising outlook
For many pharmacies, the past decade has been characterised by real-terms cuts, declining profit margins, and increasing operational pressure.
An independent Economic Analysis commissioned by NHS England revealed that 47 per cent of pharmacy branches were not profitable at EBITDA level in their last accounting year.
This new settlement, while not a complete fix, represents the first meaningful investment in core funding in over 10 years.
One of the most important aspects of this is that it is not just a one-off injection.
The Government has committed to developing a sustainable operational and funding model, recognising pharmacy’s vital role in future NHS delivery.
How will this affect your pharmacy’s bottom line?
Pharmacies can expect to see:
- More stable cash flow, thanks to the SAF increase and improved margin provision
- Greater opportunity to diversify income streams, particularly through advanced services like Pharmacy First and the Contraception Service
- Increased funding security, particularly for those delivering high levels of NHS services
- Reduced financial uncertainty due to the £193 million margin write-off, which clears historic debt and creates breathing space
However, to benefit fully, pharmacies must ensure they are well-prepared, compliant, and proactive in delivering the services that are being incentivised.
Three steps pharmacy owners should take now
- Review your service delivery strategy
Start preparing for the expansions to Pharmacy First and NMS.
Ensure staff are trained, SOPs are in place, and you are ready to claim the new fees, including the new monthly payment bands and the 75 per cent aspiration payment.
- Reassess your financial performance and projections
With margin provisions increasing and core funding stabilising, now is the time to update your budgeting, forecasting and business plans.
Consider how you can reinvest for growth, be it through hiring, extending opening hours, or investing in new services.
- Get expert financial guidance
This settlement introduces new complexities, particularly around margin monitoring, tax planning and service profitability.
Our team have many years of experience in helping pharmacies, and we can help you remain compliant with HM Revenue & Customs (HMRC), and identify opportunities for improved tax efficiency and margin optimisation.
A turning point, but not the endgame
While this settlement marks a big improvement, it does not close the funding gap entirely.
The independent Economic Analysis found that nearly all pharmacies receive less than the full economic cost of operating.
This means that smart financial management remains as vital as ever.
The funding uplift gives the sector a foundation on which to build, but only those pharmacies that prepare and adapt will be in the best position to thrive.
Let us help you make the most of this moment.
Contact us today to find out how we can support your pharmacy’s future.
