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GP Earnings and Expenses Enquiry - 2005-2006, Final report

This is part of

Official statistics
Publication date:
Geographic coverage:
United Kingdom
Geographical granularity:
Country
Date range:
06 Apr 2005 to 05 Apr 2006

Summary

This report presents the final range of results from the GP Earnings and Expenses Enquiry for the financial year 2005/06. It expands on the report published in October 2007. The new sections are Detailed Results for Contracted GPs (Section E), Headline Figures Time Series for Contracted GPs (Section F) and Accounting year-end analysis (Section G). The Distributional Results for Contracted GPs (Section C) and the Glossary have been expanded.

The results for contracted GPs are based on a sample of 17,581 GPs who report one or more sources of self-employment income with accounting year ending in the final quarter (1st January 2006 to 5th April 2006). Figures for contracted GPs relate to earnings, expenses and income derived from all self-employed sources, as reported on tax returns, and so include private as well as NHS work.

The results for salaried GPs are based on a sample of 2,743 salaried GPs who were identified as being salaried (i.e. submitted a self-assessment tax return for the year 2005/06 and were found to have more income from employment than self-employment). Figures for salaried GPs relate to earnings, expenses and income derived from all employed and self-employed sources, as reported on tax returns, and so include private as well as NHS work.

For both full-time and part-time contractor GPs the results do not include earnings from employment (as a salaried employee) and relate to NHS and private work. The estimates of earnings exclude an estimate of employer's superannuation contributions in the tax year, which will include any Primary Care Organisation (PCO) clawback for previous years.

For salaried GPs the results presented include both full- and part-time GPs, and refer only to those salaried GPs who submitted a self-assessment tax return for the year 2005/06 and have been identified as being salaried (see Annex A for further details).

The data source for the survey is HM Revenue and Customs' (HMRC's) tax self-assessment (SA) database and reflects the data held at May 2007. Analyses were run on an anonymised dataset by statisticians in HMRC Knowledge, Analysis and Intelligence.

This enquiry is the second to be affected by the new General Medical Services (nGMS) contract. As with the results relating to 2004/05, there have been some changes in methodology compared to that used under the old contract, which are discussed further in Annex A.

This report has been agreed by the Technical Steering Committee (TSC), which has representation from the four UK Health Departments, NHS Employers and the British Medical Association.

For 2005/6, £11,764 has been deducted from average earnings figures for UK GPMS GPs as an estimate of the amount included on tax returns in respect of employer's superannuation contributions paid in 2005/06. It should be noted that this figure is higher than that deducted in 2004/05, which was £6,234. There are a number of reasons for the £5,530 increase in the adjustment, which include:

  • increases in net income
  • wider compliance with HMRC guidance on the tax treatment of superannuation contributions on tax returns
  • clawback by PCOs for superannuation contributions not withheld from global sum payments in 2004/5, because the GP/PCO had underestimated predicted earnings for the year.

It is not possible to quantify the relative effects of the different factors. Provided the HMRC guidance for reporting superannuation contributions are, and continue to be, followed at a similar level to 2005/6, there will be no large changes in the average level of the adjustment from improved compliance.

Year on year variation in the adjustment will continue to be affected by increases in net income and the effect of clawback. A range of estimates of the effect of pension clawback is given in Annex B. It is possible that the effect of the issues is greater this year than it will be in subsequent years, and it will be necessary to consider future impact once 2006/7 data is available in 2008.

Key facts

Section A - national averages for contracted GPs

The main findings from a sample of 17,581 GPs are:

  • for contracted GPMS GPs in the UK, average net profit was:
    • £106,312 for GMS GPs (an increase of 10.4 per cent since 2004/05)
    • £120,272 for PMS GPs (an increase of 9.2 per cent since 2004/05)
    • £110,004 for GPMS GPs (an increase of 9.8 per cent since 2004/05).
  • for contracted GPMS GPs in the UK average gross turnover was £245,020 (an increase of 6.5 per cent since 2004/5). Average expenses were £135,016 (an increase of 3.9 per cent since 2004/5)

    The GPMS expenses to earnings ratio (this is a measure of the proportion of an individuals gross turnover that is consumed by business expenses and for ease of understanding is expressed as a percentage throughout this report) was 55.1 per cent. This is a decrease of 1.4 percentage points from the 2004/05 expenses to earnings ratio of 56.5 per cent, which reflects the higher increase in overall profit compared to expenses over this period

    The gross turnover and net profit figures associated with the expenses to earnings ratio include income from private work in addition to NHS earnings
  • PMS net profit was 13.1 per cent higher than GMS net profit (£120,272 compared to £106,312); for 2004/05 the corresponding percentage was 14.4 per cent (£110,164 compared to £96,322)
  • average net profit among GMS GPs (those working under General Medical Services) was:
    • £102,648 for non-dispensing GPs (an increase of 11.4 per cent since 2004/05)
    • £124,891 for dispensing GPs (an increase of 6.7 per cent since 2004/05)
  • average net profit among PMS GPs (those working under Personal Medical Services) was:
    • £118,109 for non-dispensing GPs (an increase of 9.9 per cent since 2004/05)
    • £134,268 for dispensing GPs (an increase of 5.2 per cent since 2004/05).
  • average net profit among GPMS GPs (those working under GMS or PMS contracts) was:
    • £106,681 for non-dispensing GPs (an increase of 10.4 per cent since 2004/05)
    • £127,061 for dispensing GPs (an increase of 6.3 per cent since 2004/05).
  • GMS dispensers had a 21.7 per cent higher average net profit than GMS non-dispensers (£124,891 compared to £102,648). PMS dispensers had an average net profit 13.7 per cent higher than their non-dispensing counterparts (£134,268 compared to £118,109). In 2004/05, average GMS net profit was 27 per cent higher among dispensers and average PMS net profit was 18.7 per cent higher among dispensers.
  • there are a number of reasons for these differences in the rate of growth of earnings between GPs. These are likely to include the increase in the number of pounds per QOF point which benefits practices with large list sizes, as the payment is associated with the practice list size, and large practices are generally non-dispensing practices.

    Another issue to take into account is the changes in reimbursement for dispensed medicines. In 2005 updated versions of the NHS Drugs Tariff and Pharmaceutical Price Regulation Scheme (PPRS) came into effect, which were designed to reduce the NHS drugs bill. This means that dispensing GPs saw a slower rate of growth in their gross turnover and the profit made on the reimbursement of drug costs.

Section B - country level breakdown for contracted GPs

  • in 2005/06, average net profit was £113,614 in England, £98,656 in Northern Ireland, £90,619 in Scotland and £102,194 in Wales
  • Between 2004/05 and 2005/06, average net profit increased by 9.7 per cent in England, 8.2 per cent in Northern Ireland, 9.6 per cent in Scotland and 11.6 per cent in Wales

Section C - distributional results for contracted GPs

  • in 2005/06, it is estimated that 2,001 GPs (5.9 per cent) had a net profit of up to £50,000. In 2004/05, this figure was 3,060 (9.0 per cent)
  • in 2005/06, it is estimated that 12,342 GPs (36.4 per cent) had a net profit of between £50,000 and £100,000. In 2004/05, this figure was 15,442 (45.6 per cent)
  • in 2005/06, it is estimated that 14,534 GPs (42.9 per cent) had a net profit of between £100,000 and £150,000. In 2004/05, this figure was 12,264 (36.2 per cent)
  • in 2005/06, it is estimated that 3,876 (11.4 per cent) of GPs had a net profit of between £150,000 and £200,000. In 2004/05, this figure was 2,492 (7.4 per cent)
  • in 2005/06, it is estimated that 815 GPs (2.4 per cent) had a net profit of between £200,000 and £250,000. In 2004/05, this figure was 475 (1.4 per cent)
  • in 2005/06, it is estimated that 307 GPs (0.9%) had a net profit of at least £250,000. In 2004/05, this figure was 154 (0.5 per cent)
  • dispensing GPs are distributed towards the higher ends of the gross turnover, expenses and net profit distributions, compared to non-dispensing GPs. In 2005/06 it is estimated that 317 GPs (6.0 per cent) of dispensers and 805 GPs (2.8 per cent) of non-dispensers received a net profit of at least £200,000. In 2004/05, these figures were 209 GPs (3.9 per cent) for dispensers and 420 GPs (1.5 per cent) for non-dispensers.

Section D - national averages for salaried GPs

  • for all UK GPMS GPs identified as being salaried (more employed income than self-employed income) in 2005/06 average pre-tax earnings from all sources of income (both from employment and self-employment) reported was £46,905.

It is important to note that the results presented for salaried GPs do not differentiate between full- and part-time GPs, and that these results only refer to a sample of salaried GPs who submitted a self-assessment tax return for 2005/06 and have been identified as being salaried.

Section E - detailed results for contracted GPs

  • average net profit and average total expenses rise with increasing age of GP up to the 50-59 age group, and then decrease slightly in the 60 and over age group. Average net profit among GPMS GPs in the 50-59 age group was £117,820 in 2005/06
  • GPs whose practice is categorised as rural have higher average gross earnings, expenses and net profit than GPs whose practice is categorised as urban. GPMS GPs in rural practices have a net profit of £116,967, whilst GPs in urban practices have a net profit of £108,455
  • among GPMS GPs classified as working at rural practices, 57.5 per cent of these are dispensing GPs. This compares to GPMS GPs classified as working in urban practices, where 6.5 per cent are dispensing GPs
  • a comparison of earnings amongst GPMS GPs by Government Office Region in England shows that GPs in the South West have the lowest net profit at £99,001
  • a comparison of the expenses to earnings ratio amongst GPMS GPs by Government Office Region in England shows that GPs in the South West have the highest expenses to earnings ratio at 59.1 per cent
  • average net profit decreased as the number of partners in the practice increased. Among GPMS GPs, single-handed contractor GPs have the highest net profit at £132,010, and GPs working with six or more partners have the lowest net profit at £105,769.

Section F - headline figures time series for contracted GPs (1971/72 to 2005/06)

  • this section presents information on contracted GP earnings between 1971/72 and 2005/06. Data are presented in both nominal (cash) terms and in 2005/06 real terms using GDP deflators published by Her Majesty's Treasury. As 2005/06 has been used as the base year, the nominal and real terms amounts in 2005/06 are identical.
  • when interpreting the figures it is important to note that the nature of GP contracts and their work has also changed over time. Earnings information represents just one element of understanding change over time.
  • in 2005/06, GMS GPs had an average net income of £106,312. In 1985/86 their average net income was £25,254 in nominal terms, equivalent to £51,512 in real terms.
  • in 2005/06, PMS GPs had an average net income of £120,272. In 2002/03 their average net income was £85,019 in nominal terms, equivalent to £91,798 in real terms.
  • in 2005/06, GPMS GPs had an average net income of £110,004. In 2002/03 their average net income was £72,716 in nominal terms, equivalent to £78,512 in real terms.
  • the average Expenses to Earnings ratio (EER) is higher among PMS than GMS GPs. The difference between the respective EERs has grown from 0.2 percentage points in 2002/03 to 3.0 percentage points in 2005/06.
  • in 2004/05 average NHS pensionable income among GPMS GPs was £86,225 in nominal terms. In 2002/03, this was £64,443 in nominal terms.
  • the source of the (nominal) earnings information is past TSC reports, held by the TSC secretariat and earlier reports held by BMA GPC.

Section G - Accounting Year-End Analysis

  • in 2005/06, 64 per cent of GPMS GPs had one or more accounting period ending in Q4, an increase of one percentage point from 2004/05
  • the latest analysis using the 2005/06 enquiry shows that the difference is significant between the Q4 EER of 55.1% ± 0.3 per cent and the all-quarter EER of 55.7 per cent ± 0.2 pre cent for GPMS GPs, albeit small in absolute terms.

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Last edited: 1 April 2019 2:51 pm