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Last updated: 26.06.17

How is the NHS funded?

Under the current government, healthcare and the NHS have been subjected to much strain, with funding cuts that are causing staff to be over-worked and hospitals to become overcrowded.

There is much worry over the future of the NHS, with various political parties having very different approaches to how healthcare should be funded. However, one thing that is certain is that under the current system, hospitals are becoming overcrowded, A&E waiting times are becoming longer and staff are overworked.

According to the Royal College of Surgeons, the number of patients waiting six months or more for surgery has tripled over the past four years in England. In March, almost 130,000 people had been waiting for operations after being referred to a consultant, compared to 45,000 to the same time period in 2013.

Regular figures like this have repeatedly raised questions about the sustainability of the NHS’s funding model. Here we take a look at how healthcare is funded in the UK.


Treatment on the NHS is available to all UK citizens free of charge and is funded by taxation supplemented by National Insurance contributions. Founded by a Labour government, many healthcare professionals would argue that free healthcare is one of the best systems to come out of the country’s political history.

There are some services that patients must pay for, such as prescriptions and dental treatment. However, this does depend on the type of patient (whether they are receiving benefit support, over the age of 60 or under 16 years).

Over the years, the contribution from taxes, National Insurance and user charges has fluctuated. UK citizens can also opt to use private healthcare, where they pay for the service. Many businesses and corporations offer their employees private healthcare as part of their remuneration package, meaning that private health insurance policies are held by 10.6 per cent of the population.

Tax System

In the UK, the taxation model spans across the whole of the population to make healthcare available on a universal basis. A person, household or corporation will be taxed via Income Tax or Corporation Tax, and indirect taxes are applied to the manufacture or sales of goods and services.

If a government raises taxes, it can use the money for healthcare in a specific region or local area that could be more deprived. While general taxes are an efficient way of increasing money (with low administration costs relative to the amount of money they raise), it has been argued that this way of funding healthcare consumes too high a proportion of public spending.

In order to pay for increasing healthcare demands, governments can either decide to divert funds away from other areas of public spending, or raise tax - something that is unpopular among the public.

Challenges for healthcare

While the way in which healthcare is funded varies across the globe, all countries face similar challenges. Mostly, they relate to meeting the rising demand for services, and transforming care to cope with an ageing population and different patterns of disease.

What’s clear in the UK is that the NHS is under more strain than it ever has been before. Regardless of which political party leads the country, the maintenance and funding of the NHS must be at the forefront of their manifesto, with a strategy that is of best service to the British public.