DHSC group accounting manual 2025 to 2026: additional guidance
Updated 9 January 2026
© Crown copyright 2026
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1. The Department of Health and Social Care (DHSC) group accounting manual 2025 to 2026 (GAM) was published in June 2025. The GAM sets the accounting policies to be followed by members of the department’s consolidation group and provides principles-based guidance to DHSC group bodies on how to prepare and complete their annual reports and accounts (ARA).
2. NHS foundation trusts follow the NHS foundation trust annual reporting manual 2025 to 2026 for the purpose of preparing annual reports.
3. This additional guidance updates the GAM, is mandatory, and must be treated as having the same status as the GAM itself.
4. This document will be updated as additional questions arise, so that all additional guidance for 2025 to 2026 will be contained within a single document.
5. This is the initial version of the additional guidance to be published for the 2025 to 2026 GAM.
FAQ 1: changes in HM Treasury discount rates during 2025 to 2026
Background
6. As advised in the GAM (chapter 4 annex 7), HM Treasury (HMT) discount rates are revised each year and are notified by means of a public expenditure system (PES) paper.
7. ‘PES (2025) 09 discount rates for general provisions, post-employment benefits, financial instruments and leases (under IFRS 16)’ was issued on 4 December 2025.
GAM application
8. By issue of this FAQ, chapter 4 annex 7 and chapter 5 annex 1, note 1.22 of the GAM are updated in accordance with the following text.
Summary of discount rates to be applied as at 31 March 2026
9. The discount rates to be applied as at 31 March 2026 for general provisions, post-employment benefits and financial instruments are summarised below.
Table 1a: nominal general provisions discount rates
| Rate type | Rate | Prior year rate |
|---|---|---|
| Short-term | 3.64% | 4.03% |
| Medium-term | 4.22% | 4.07% |
| Long-term | 5.32% | 4.81% |
| Very long-term | 5.07% | 4.55% |
Table 1b: general provisions inflation rates
| Rate type | Rate | Prior year rate |
|---|---|---|
| Year 1 | 2.50% | 2.6% |
| Year 2 | 2.00% | 2.3% |
| Into perpetuity | 2.00% | 2.0% |
Table 1c: post-employment benefits discount rate
| Rate type | Rate | Prior year rate |
|---|---|---|
| Real rate | 2.95% | 2.40% |
| Nominal rate | 5.60% | 5.15% |
| Consumer prices index (CPI) inflation | 2.55% | 2.65% |
Table 1d: financial instrument discount rate
| Rate type | Rate | Prior year rate |
|---|---|---|
| Nominal rate | 2.45% | 2.15% |
| Real rate with reference to retail prices index (RPI) until February 2030 | –0.55% | –0.85% |
| Real rate with reference to RPI from February 2030 | 0.35% | 0.05% |
10. The following detail is provided to assist preparers in utilising the various discount rates.
General provisions
11. General provisions discount rates are used to discount future cash flows related to provisions recognised in accordance with international accounting standard (IAS) 37.
12. HMT gives rates for short, medium, long-term and very long-term general provisions. These are defined as follows:
- short-term rate: a nominal discount rate to be applied to the cash flows of general provisions in a time boundary between 0 and up to and including 5 years from the statement of financial position date
- medium-term rate: a nominal discount rate to be applied to the cash flows of general provisions in a time boundary of after 5 and up to and including 10 years from the statement of financial position date
- long-term rate: a nominal discount rate to be applied to the cash flows of general provisions in a time boundary of after 10 years and up to and including 40 years from the statement of financial position date
- very long-term rate: a nominal discount rate to be applied to the cash flows of general provisions in a time boundary exceeding 40 years from the statement of financial position date
13. Note that it is the timing of the expected cash flow that governs the discount rate used - the PES papers make no reference to setting discount rates according to the overall term of the arrangement. To arrive at the statement of financial position (SoFP) balance for a provision with expected cash flows occurring in each year for 60 years, cash flow should first be inflated, then each of the 4 discount rates will need to be applied. It would not be appropriate to discount cash flows at the very long-term rate in the first 40 years simply because the liability is not expected to be wholly discharged until year 60.
Inflation assumptions
14. The central inflation assumptions offered in table 1b have been provided by HMT. They are based on what is judged to be the most statistically reliable measure of inflation (the Office for Budget Responsibility Consumer Prices Index (OBR CPI) forecasts).
15. The OBR CPI inflation rates should be applied across the following time frames:
- year 1: applied on cash flows up to and including 1 year from the date of the statement of financial position
- year 2: applied on cash flows from after 1 and up to and including 2 years from the date of the statement of financial position
- into perpetuity: applied on cash flows from after 2 years from the date of the statement of financial position
16. HMT considers the presumption to use OBR CPI inflation rebuttable only in certain instances. It is for each entity to assure itself over the reasonableness of the judgements made against the following criteria provided by HMT as to when it is considered acceptable to rebut the presumption of inflating cashflows using OBR CPI.
17. Where no legal or other requirement prohibits the application of OBR CPI inflation, entities must satisfy themselves that all the following apply:
- there is a logical basis for not applying OBR CPI inflation rates, in that the proposed alternative inflation rates would be clearly more applicable to the underlying nature of the cash flows
- the proposed alternative inflation rates must be free from management bias. An indication of this may be an independent or professional assessment of the proposed alternative inflation rates, such as by a committee, third party or other experts
- the inflation rates instead applied should be based on logical and relevant calculations and reasonable underlying assumptions. For example, they may be comparable to existing financial indices or based on historical trends
18. Where a legal requirement exists prohibiting the application of the OBR CPI rates or requires an adjustment to the rate applied, approaches to establishing an appropriate rate are set out as follows:
- an inflation rate specified by statute or by the courts can be applied instead of OBR CPI inflation
- OBR CPI can be adjusted where this is required by statute or by the courts; for example, in the case of legally enforceable public pension caps
- where OBR CPI cannot be applied by statute or by the courts, but an alternative rate or adjustment is not prescribed, a comparative inflation rate must instead be applied and must fulfil conditions as set out above
19. The below is an excerpt from annex C of PES (2025) 09 which provides combined OBR CPI inflation and discount rates for up to 50 years after the statement of financial position date. Annex C offers combined rates for up to and including 200 years. This is available on request by emailing dh_gam@dhsc.gov.uk.
Table 2: 50 year excerpt from annex C PES (2025) 09
| Year | Inflation rate | Inflation cumulative | Discount rate | Cumulative combined rate |
|---|---|---|---|---|
| 1 | 2.5% | 102.5% | 3.64% | 98.90% |
| 2 | 2.0% | 104.6% | 3.64% | 97.34% |
| 3 | 2.0% | 106.6% | 3.64% | 95.80% |
| 4 | 2.0% | 108.8% | 3.64% | 94.29% |
| 5 | 2.0% | 110.9% | 3.64% | 92.80% |
| 6 | 2.0% | 113.2% | 4.22% | 88.32% |
| 7 | 2.0% | 115.4% | 4.22% | 86.44% |
| 8 | 2.0% | 117.7% | 4.22% | 84.60% |
| 9 | 2.0% | 120.1% | 4.22% | 82.80% |
| 10 | 2.0% | 122.5% | 4.22% | 81.04% |
| 11 | 2.0% | 124.9% | 5.32% | 70.67% |
| 12 | 2.0% | 127.4% | 5.32% | 68.44% |
| 13 | 2.0% | 130.0% | 5.32% | 66.28% |
| 14 | 2.0% | 132.6% | 5.32% | 64.20% |
| 15 | 2.0% | 135.2% | 5.32% | 62.17% |
| 16 | 2.0% | 138.0% | 5.32% | 60.21% |
| 17 | 2.0% | 140.7% | 5.32% | 58.32% |
| 18 | 2.0% | 143.5% | 5.32% | 56.48% |
| 19 | 2.0% | 146.4% | 5.32% | 54.70% |
| 20 | 2.0% | 149.3% | 5.32% | 52.98% |
| 21 | 2.0% | 152.3% | 5.32% | 51.31% |
| 22 | 2.0% | 155.4% | 5.32% | 49.69% |
| 23 | 2.0% | 158.5% | 5.32% | 48.13% |
| 24 | 2.0% | 161.6% | 5.32% | 46.61% |
| 25 | 2.0% | 164.9% | 5.32% | 45.14% |
| 26 | 2.0% | 168.2% | 5.32% | 43.72% |
| 27 | 2.0% | 171.5% | 5.32% | 42.34% |
| 28 | 2.0% | 175.0% | 5.32% | 41.01% |
| 29 | 2.0% | 178.5% | 5.32% | 39.72% |
| 30 | 2.0% | 182.0% | 5.32% | 38.47% |
| 31 | 2.0% | 185.7% | 5.32% | 37.25% |
| 32 | 2.0% | 189.4% | 5.32% | 36.08% |
| 33 | 2.0% | 193.2% | 5.32% | 34.94% |
| 34 | 2.0% | 197.0% | 5.32% | 33.84% |
| 35 | 2.0% | 201.0% | 5.32% | 32.78% |
| 36 | 2.0% | 205.0% | 5.32% | 31.74% |
| 37 | 2.0% | 209.1% | 5.32% | 30.74% |
| 38 | 2.0% | 213.3% | 5.32% | 29.78% |
| 39 | 2.0% | 217.5% | 5.32% | 28.84% |
| 40 | 2.0% | 221.9% | 5.32% | 27.93% |
| 41 | 2.0% | 226.3% | 5.07% | 29.79% |
| 42 | 2.0% | 230.9% | 5.07% | 28.92% |
| 43 | 2.0% | 235.5% | 5.07% | 28.07% |
| 44 | 2.0% | 240.2% | 5.07% | 27.25% |
| 45 | 2.0% | 245.0% | 5.07% | 26.46% |
| 46 | 2.0% | 249.9% | 5.07% | 25.68% |
| 47 | 2.0% | 254.9% | 5.07% | 24.93% |
| 48 | 2.0% | 260.0% | 5.07% | 24.21% |
| 49 | 2.0% | 265.2% | 5.07% | 23.50% |
| 50 | 2.0% | 270.5% | 5.07% | 22.81% |
Post-employment benefit provisions
20. The real discount rate applicable on 31 March 2026 is 2.95% (the previous year’s rate was 2.40%), with CPI measured at 2.55%.
21. The rate is applicable for all provisions for continuing obligations arising from previous employment service.
22. HMT considers that schemes for which RPI is a material assumption are limited and consequently will no longer provide rates that take account of RPI inflation.
23. A nominal rate to be used for assessing interest costs of scheme liabilities for 2025 to 2026 is set at 5.60%.
Financial instruments
24. The financial instrument discount rate is used for some financial instruments in accordance with the requirements of the financial reporting manual (FReM).
25. The FReM states:
Where future cash flows are discounted to measure fair value, entities should use the higher of the rate intrinsic to the financial instrument and the real financial instrument discount rate set by HMT (promulgated in PES papers) as applied to the flows expressed in current prices.
26. To reflect the upcoming changes to RPI in 2030, HMT has provided real rates for before and after February 2030. Accordingly, the real financial instrument discount rate to be applied as at 31 March 2026 is –0.55% (prior year rate minus 0.85%) until February 2030 and 0.35% (prior year rate 0.05%) after February 2030. These rates can be applied where the instrument is index linked to RPI.
27. While entities should employ their own RPI modelling, HMT has provided indicative RPI rates of 3.00% until February 2030 and 2.10% from February 2030.
28. Where the financial instrument is not linked to an inflationary index, and a nominal rate is required, 2.45% (previously 2.15%) may be used.
Leases
29. PES (2024) 09 confirmed that the HMT incremental borrowing rate (a nominal rate) of 4.81% is to be applied for new leases commencing, or relevant lease modifications or remeasurements being remeasured in the 2025 calendar year under IFRS 16.
30. For the 2026 calendar year, PES (2025) 09 confirms the incremental borrowing rate as 5.32%. This will be relevant for newly commenced leases, relevant lease modifications (paragraph 45 of IFRS 16) and relevant lease remeasurement scenarios (paragraph 40 of IFRS 16), occurring in 2026.
FAQ 2: injury costs recovery revenue, probability of non-recovery
Background
31. Paragraphs 4.88 to 4.97 of the GAM describe the treatment of injury costs recovery (ICR) revenue.
32. When estimating lifetime expected credit losses in relation to ICR receivables, the GAM instructs NHS providers to include an amount within the credit loss allowances for contract receivables to reflect income that is not expected to be recoverable. Each year, the compensation recovery unit (CRU) advises a percentage probability of not receiving the income.
33. The figure for 2025 to 2026 is 24.62%. By issue of this FAQ, paragraph 4.95 of the GAM is amended to reflect this figure.
GAM application
34. If it is material, 24.62% of accrued ICR revenue should be used to calculate expected credit losses. However, where NHS providers are in a position to make a reliable estimate of their own percentage, they should use their own local information to inform the expected credit loss position.
35. The above instruction aligns to the IFRS 9 simplified approach to impairments as mandated by HMT adaptations and interpretations to the standard.
FAQ 3: pension contribution treatment
36. The process established in 2019 to 2020 by which NHS England made contributions towards the pension contribution increases continues to be employed in 2025 to 2026.
37. NHS England guidance on this process remains in place and per the 2019 to 2020 GAM FAQ 6, accounting for the employer contribution in full and on a gross basis is in line with application of IAS 19, no adjustment will be made to disclose pension costs in chapter 5 of the GAM.
FAQ 4: FReM updates impacting the GAM
Background
38. HMT updates the current version of the FReM each December. Not all of these updates impact the guidance provided in the GAM as for instance there can be presentational changes in the FReM and updates that have already been incorporated into the GAM. The below details the December 2025 updates to the 2025 to 2026 FReM that are required to be reflected in the GAM.
39. The FReM 2025 to 2026 adapts the IAS 1 ‘Presentation of Financial Statements’ where merger accounting is used for machinery of government (MoG) changes. In certain circumstances the requirement for a SoFP as at the beginning of the previous reporting period has been removed. Accordingly, the GAM reflects this change in chapter 4 annex 1. Where absorption accounting is used, there is no change to existing requirements.
40. The FreM 2025 to 2026 clarifies that non-executive directors (NEDs) are outside of the scope of fair pay disclosures and should not be included in the fair pay calculations. Where entities included NEDs in prior years, they do not need to restate prior year disclosures but provide a footnote stating the prior year disclosures include NEDs. The GAM reflects this update in paragraph 3.109.
41. Table 2 in chapter 4 annex 1 of the GAM 2025 to 2026 has been updated to reflect a change introduced at the end of table 2 in section 8.2 of the FreM. This update clarifies that, when accounting for a MoG change, the transferee and transferor should apply either merger or absorption accounting to the transfer. From the transferor’s perspective, this represents an adaptation to IFRS. Although this is not a new adaptation, it has been explicitly included in the list of adaptations and interpretations to IFRS in the FReM for completeness.
FAQ 5: GAM reporting updates and corrections
Background
42. This FAQ details the reporting updates requiring insertion into the GAM that do not stem from FReM updates.
Clarification of expectations regarding revaluation reserve balances for intangible assets on transition to cost model
43. In paragraph 4.207 the GAM provides a clarification of treatment of revaluation reserve balances attributable to intangible assets held in the revaluation reserve as at 31 March 2025. On transition to cost model these balances are expected to be transferred to general fund (or equivalent).
Remuneration of very senior managers (VSM) - updated guidance
44. Paragraphs 3.90 to 3.92 of the GAM 2025 to 2026 introduce revised requirements for disclosures relating to the remuneration of VSM following the publication of the NHS VSM pay framework. While the guidance for NHS foundation trusts is provided in the NHS foundation trust annual reporting manual (FT ARM), the GAM clarifies that compliance with the VSM pay framework is expected for integrated care boards (ICBs) and NHS trusts.
Special severance payments - approval requirements
45. Following the publication of updated guidance on public sector exit payments, the department has authority to approve some special severance payments. This update has been reflected in the disclosure of non-contractual severance payments requiring approval in paragraph 3.185 and in table 2: analysis of other departures within annex 3 to chapter 3.