In a GP partnership the most important tax decision you make is how you split the profit, because partners are taxed on their profit share, not their drawings. The amount allocated to you in the partnership deed flows straight onto your personal tax return and drives your income tax, your Class 4 National Insurance and, crucially for doctors, your NHS pension growth. This guide focuses on that one question: how GP partnership profit allocation works and how to plan it for 2026/27.

This page sits alongside our broader GP partnership tax complete guide, which covers the full partnership tax framework. Here we go deep on allocation: prior shares, the deed, the premises return, and how a rising share interacts with the pension annual allowance. For the wider rules on returns, basis periods and partner admission, follow the links through to the complete guide and the related pages.

Profit share, not drawings: how a GP partner is actually taxed

A GP partnership is tax transparent. The partnership itself pays no tax. It files a partnership return (the SA800), which reports the total practice profit and how it was divided. Each partner then reports their allocated slice on the partnership pages (the SA104) of their own Self Assessment return, where it is taxed as self-employed trading income.

The key point that catches many new partners out is that you are taxed on the profit allocated to you, regardless of how much cash you actually drew. Drawings are simply a monthly advance against your eventual share, trued up at the year-end once the accounts are finalised. If the practice has a strong year and your allocated share is higher than your drawings, you are taxed on the full share, not the lower cash figure. This is why partners need to retain a tax reserve rather than spending everything they draw.

On that share you pay income tax at your marginal rate and Class 4 National Insurance at 6% on profits between £12,570 and £50,270, then 2% above £50,270 (the main rate fell from 9% to 6% from 6 April 2024). Class 2 National Insurance is no longer a required payment from 6 April 2024: partners with profits at or above the Small Profits Threshold are treated as having paid and keep their state pension entitlement without a weekly charge.

What drives the allocation: prior shares and the partnership deed

How the profit is divided is set by the partnership deed (the agreement), not by HMRC. A well-drafted GP deed usually allocates profit in a defined order rather than a single flat split.

Prior shares come off the top first

Prior shares are amounts allocated to specific partners before the residual profit is divided. Common examples in general practice include:

  • a seniority element rewarding length of service or a senior partner role;
  • a premises return paid to the partners who own the surgery building (more on this below);
  • a fixed allocation for a partner carrying extra clinical, training or management responsibility (for example a GP trainer, a Caldicott or safeguarding lead, or a PCN clinical director role);
  • an allocation tied to specific income a partner generates, such as private or non-NHS work.

Only after the prior shares are taken does the balance of profit get split in the partnership's residual ratios, which may be equal or weighted by sessions or seniority.

The residual split and joiners or leavers

Most GP partnerships divide the residual profit either equally or in agreed fractions. Where a partner joins or leaves part way through the year, the deed should set out how their share is time-apportioned for that year so the allocation reflects the period they were actually a partner. Because HMRC taxes each partner on the share the deed entitles them to, the deed must be current, signed and reflect the genuine economic split. An out-of-date or unsigned deed is a common and avoidable problem on a partner dispute or an HMRC enquiry.

NHS practice income and what is being shared

It helps to be clear about what the profit being shared actually comes from. Core NHS general practice funding flows through a GMS, PMS or APMS contract: the Global Sum (a per-patient payment weighted by the Carr-Hill formula for age, sex, morbidity, list turnover and geography), plus QOF (the Quality and Outcomes Framework), enhanced services, and PCN / Network Contract DES funding including the Additional Roles Reimbursement Scheme (ARRS). Dispensing practices also earn dispensing income. There is no single national per-patient figure, because the Global Sum and QOF point value are weighted and uplifted annually.

Note that general practice income comes through these NHS funding streams. GPs do not work in units of dental activity or treatment bands, so do not let any dental-style framing creep into your planning. A limited company also cannot hold a GMS or PMS contract, which is why core NHS practice income is shared as a partnership profit, not run through a company (see the pension section below).

The premises return: a feature unique to general practice

Premises are a far bigger part of profit allocation for GPs than for most professions. Where partners own the surgery building, the property is often held in a separate property partnership or LLP outside the medical partnership, and the owning partners receive a premises return as a prior share.

That return typically reflects the NHS premises funding the practice receives: notional rent (for owner-occupiers, a current-market-rent figure assessed by the District Valuer), the legacy cost rent scheme (borrowing-based, closed to new schemes and converting to notional rent on mortgage redemption), or improvement grants, under the NHS (General Medical Services) Premises Costs Directions 2024. Notional rent amounts are property-specific and District-Valuer-assessed, so there is no standard figure to quote. We cover the choice in detail in notional rent vs cost rent explained and the wider own-versus-rent decision in surgery premises: own vs rent.

Two planning points follow. First, the premises return should be a clearly defined prior share in the deed so the property-owning partners are properly compensated before the residual split. Second, partners need to understand the last man standing risk: a single remaining partner can be left holding the whole premises liability and lease. We deal with that specifically in the last man standing premises risk.

Profit share and the NHS pension: why allocation and pension planning go together

For a GP partner, the size of your profit share directly drives your NHS-pensionable profit, and therefore your pension growth. A Type 1 medical practitioner (a GP provider or partner) pensions their NHS-derived profit and completes the Annual Certificate of Pensionable Profits each year via PCSE. A bigger share usually means a bigger pension input amount, which is the figure measured against the annual allowance.

For 2026/27 the standard pension annual allowance is £60,000. It tapers where threshold income exceeds £200,000 and adjusted income exceeds £260,000, reducing by £1 for every £2 of adjusted income above £260,000, down to a £10,000 floor. For a defined-benefit scheme like the NHS scheme, what matters is the capitalised growth in your benefits (the pension input amount), not the contributions deducted. A partner whose share pushes them across the taper can face an annual allowance charge at their marginal rate.

This is the core reason allocation cannot be planned in a vacuum. A decision to move profit toward a senior partner can increase their pension input and tip them into an annual allowance charge, while unused annual allowance can be carried forward from the previous three tax years. Where a charge does arise, Scheme Pays can settle it from the pension itself, with its own deadlines. For the mechanics, see our guides to the NHS pension annual allowance, the tapered annual allowance, and Scheme Pays deadlines.

The £60,000 allowance has been in place since April 2023, when it rose from the previous £40,000. If you are reading older guidance quoting a £40,000 allowance, a £240,000 adjusted-income threshold or a £4,000 floor, those figures are out of date.

Tax planning around the allocation

Aligning shares with marginal rates and entitlement

Where partners sit at different marginal rates, the deed can legitimately weight residual shares or prior shares to reflect genuine differences in contribution, responsibility and seniority. What the deed cannot do is allocate profit to a lower-rate partner purely to reduce tax with no commercial substance. HMRC can challenge an allocation that does not reflect the economic reality of who earned the income, so every prior share and ratio should have a documented business rationale and each partner must actually be entitled to their share under the deed.

Smoothing across years and the basis period

Since the move to the tax-year basis (basis period reform), partners are taxed on the profit arising in the tax year itself, which removes the old timing differences and makes year-to-year variations land immediately. Where the deed allows shares to vary between years for genuine reasons, smoothing allocations can help keep partners below higher-rate thresholds and reduce annual allowance spikes, but the smoothing must be a real agreement, not a retrospective relabelling.

Private and non-NHS work, and the incorporation question

Many GP partners do private work (insurance medicals, medico-legal reports, occupational health or self-pay clinics) on top of their NHS share. That income is often allocated to the partner who does it as a prior share, or earned outside the partnership entirely. Some partners ask whether to route private work through a limited company.

This is where doctors must be careful. A company cannot hold an NHS GMS or PMS contract, and income routed through a company is not NHS-pensionable. So incorporation is a private-work-only decision, and any tax saving has to be weighed against the loss of NHS pension accrual on that income. At 2026/27 rates the pure tax saving is modest in any case, and the dividend rate rise narrows it further: from 6 April 2026 dividends are taxed at 10.75% ordinary, 35.75% upper and 39.35% additional (the additional rate is unchanged), with a £500 dividend allowance (the 2025/26 rates were 8.75% / 33.75% / 39.35%). We weigh the full picture in the GP limited company benefits and drawbacks and medical practice incorporation step by step. Treat any service-company structure as a specialist area, and never assume it is pension-neutral.

What does not transfer hands: NHS goodwill

One point that separates GP allocation and partner buy-ins from other businesses: the goodwill of an NHS medical practice cannot be sold. This has been prohibited since 1 April 2004 and the current instrument is the Primary Medical Services (Prohibition on the Sale of Goodwill) Regulations 2019 (SI 2019/251). So when a partner joins or leaves, what changes hands is a share of the partnership's tangible assets, working capital and any owned premises through the capital accounts, never NHS goodwill.

That means there is no dentist-style "sell the goodwill and claim Business Asset Disposal Relief" route for an NHS practice. BADR applies only to a genuine private-practice disposal or a share sale of an incorporated private practice, and its rate is now 18% for a disposal on or after 6 April 2026 (it was 10% to 5 April 2025 and 14% from 6 April 2025 to 5 April 2026). The numbers on a partner buy-in or buy-out are driven by the capital-account and premises-share valuation, not by goodwill. For the entry and exit mechanics see becoming a GP partner: financial implications, and for the goodwill rules in detail see can GP practice goodwill be sold.

Documentation, compliance and digital filing

HMRC scrutinises unusual or changing profit allocations, so a partnership should keep:

  • a current, signed partnership deed setting out prior shares and residual ratios;
  • records supporting any performance-based or role-based allocations;
  • minutes of the partners' meetings where allocations and any variations were agreed;
  • a clear, documented rationale for any departure from the standard split.

On digital filing, Making Tax Digital for Income Tax does not apply to general partnerships yet: partnerships are deferred with no confirmed start date, so a GP partnership is not mandated to file quarterly at partnership level. A partner's own Self Assessment can still be caught where their personal qualifying income (for example sole-trader private or locum work) exceeds £50,000 from 6 April 2026 (the threshold falls to £30,000 from April 2027 and £20,000 from April 2028). The old £10,000 figure no longer applies.

Allowable partnership and partner expenses (deductible because they are wholly and exclusively for the profession) include medical indemnity for private and non-clinical work, the GMC retention fee, relevant Royal College and BMA subscriptions, and business mileage between sites at the HMRC approved rate of 55p per mile for the first 10,000 business miles in 2026/27 (raised from 45p on 6 April 2026), then 25p per mile. Remember that NHS GP clinical negligence in England is state-indemnified through CNSGP, so personally paid indemnity is mainly for private, non-clinical or regulatory cover. Our complete list of GP tax deductions for 2026 covers this in full.

Common pitfalls to avoid

  • Treating drawings as the taxable figure rather than the allocated profit share, and under-reserving for tax as a result.
  • Running an out-of-date or unsigned partnership deed that does not match the actual split.
  • Making purely tax-driven allocations with no commercial substance.
  • Ignoring the NHS pension annual allowance impact when shifting profit toward a senior partner.
  • Failing to define the premises return as a clear prior share, leaving property-owning partners under-compensated.
  • Assuming incorporation of private work is a clear win without modelling the lost NHS pension accrual.

Getting it right with specialist advice

GP partnership profit allocation sits at the intersection of partnership law, income tax, National Insurance, the NHS pension annual allowance and the premises return. A specialist medical accountant can model different allocation scenarios, show each partner's after-tax and after-pension position, and make sure the deed, the SA800 and each partner's SA104 line up. Talk to our medical accounting team if you want your partnership's profit-sharing arrangement reviewed before the next year-end.

This article is general information for UK GPs and is not personal tax advice. Figures are stated for the 2026/27 tax year. Your own position depends on your practice, your deed and your pension circumstances, so take advice before acting.