In this paper the changes in payment of general practitioners in the UK, introduced in the 1990 contract, are described in detail. The effects of the changes on the structure of general practitioners' incomes is discussed. More emphasis on capitation payments may increase preventive activity in general practice, but, depending on the level at which the capitation fee is set, could lead to shifting of patients to other sectors in the health care economy. Target payments appear to have been successful in increasing the numbers of smears taken. It is clear that doctors respond to financial incentives, but what is not clear is whether their responses will always be in the way intended or lead to more efficient practice.