General practice is one of the most financially complex parts of the healthcare sector. Straddling the divide between private business and public funding, the overwhelming majority of practices in the UK operate as partnerships, with sometimes intricate ownership arrangements and multiple income streams.
At the same time, a combination of rising patient demand, workforce shortages and changing NHS contract requirements continue to put pressure on partners and practice managers. Xeinadin works with dozens of GP clients nationwide, including in Sutton and across London. Our latest financial analysis for the sector shows a pattern that will be familiar to many GPs – more income coming in, but rising costs, particularly around staffing, cutting margins to the quick.
In this context, accountancy takes on a new level of importance beyond meeting end-of-year reporting and tax obligations. For the GPs we work with in Sutton and beyond, accurate, reliable record-keeping is the foundation of successful financial management, allowing them to navigate the complexities and make sound decisions in an ever-changing and ever-challenging environment.
Partnership accounting essentials
Upwards of 90% of GP practices in the UK operate as partnerships. Partnerships are not incorporated companies. Instead, two or more people take direct ownership and operational control of the business. There is no limitation of legal liability as there is for limited company directors or partners operating under a limited liability partnership (LLP). All profits belong directly to the partners, but on the flipside, they are also legally responsible for any losses and debts.
This has a number of implications for accounting. On top of the usual profit and loss balance sheet requirements, practice accounts have to reflect the shared financial responsibilities between partners, plus how profits are shared.
GP practices therefore usually maintain separate capital accounts, which cover long-term fixed equity such as premises and equipment, and current accounts, which track each partner’s profit share, drawings, tax and other expenses.
Current accounts in particular play an important role in capturing the fluid nature of many GP operations. Partners may work different sessions, join or retire mid-year, or have specific arrangements set out in the partnership agreement. Accurate capital and current accounts help ensure profit is allocated correctly, drawings remain fair and affordable, and any changes in the partnership can be dealt with properly.
Profit-sharing and drawings
We’ve already mentioned the two ways GP partners can take income from a practice – profit sharing and drawings. The distinction between these two is a common source of confusion in GP finance.
A partner’s profit share is their entitlement to the practice’s annual profits. The share each partner gets is set out in the partnership agreement, with allowances calculated based on the amount of capital each partner has invested in practice, plus specific responsibilities different partners might have.
Drawings are the regular payments partners take from the practice during the year, before final profit is confirmed. It’s important that the amount partners draw from the practice is set at an appropriate level. If drawings are too high, the practice can be left facing cash flow issues when tax, pension contributions or working capital needs are taken into account.
The key is accurate forecasting. And that in turn rests on strong accounting data and regular reporting. A good grasp of expected income and expenditure over the course of a year allows partners to draw a satisfactory amount month by month without causing issues come year end.
But given that income and expenditure in GP practices is a complex mix of NHS per-patient funding, QOF bonuses, enhanced services, and reimbursement for staffing and (for dispensing surgeries) medication costs, getting forecasting right is no easy task. This is one of the areas where professional accounting expertise can make all the difference.
Tax for partners and salaried doctors
Reliable bookkeeping is also the foundation for keeping your practice tax compliant. Partnerships do not pay tax as a business. Instead, each partner pays Income Tax and NICs on their personal income from the practice via self-assessment. Tracking profit allocations accurately is therefore essential to ensuring partners pay the right amount of tax. The partnership must also submit a partnership tax return summarising the full tax position.
But partners are not the only doctors who work in a GP practice. Most surgeries also employ salaried doctors, whose Income Tax and National Insurance must be deducted through PAYE before wages are paid. On top of this, many practices also use locum GPs, who work on a freelance basis to cover staff sickness and other absences.
Practices also have to run PAYE for nurses, reception and other administration staff. Staffing costs are one of the biggest areas of expenditure for any GP practice and must be accounted for accurately to ensure final profit and tax calculations are correct.
Specialist support for GP practices in Sutton
For GP practices, accounting cannot be an afterthought. With so much financial complexity to deal with, reliable record-keeping and access to accurate data is a day-to-day necessity.
At Xeinadin Sutton, we provide the expertise that helps turn complex finances into practical, usable insight on an ongoing basis. We work with healthcare businesses across the borough, Greater London and Surrey on everything from maintaining partnership accounts to tax planning and cash flow forecasting, and from drawings reviews to NHS income analysis.
With the right advice, GP practices can strengthen financial control, reduce tax surprises and plan with greater confidence. We’re here to do just that. To find out more, contact our Sutton office today.
