Unlike the structure of the NHS, the way the NHS is funded is not rocket science. However, it’s worth being aware of the process, as the topic may come up in your medical school interviews in one form or another.
The NHS is a universal healthcare system meaning all English residents are automatically entitled to free healthcare. But it's not entirely free. After all, the money for doctors' paychecks, medications and all the medical equipment has to come from somewhere: The NHS is funded primarily through taxation (~80%). The rest comes from National Insurance and patient charges (like prescriptions and dental care).
The Department for Health and Social Care (essentially the government) decides how much funding the NHS should receive in a given year. This money then goes to NHS England, which allocates funds to 135 Clinical Commissioning Groups (CCGs), which then spend the funds depending on the local healthcare needs.
£212.1 billion - this is how much was spent on health services in 2020/21, out of which £63.4 was additional Covid-19 funding.
£181.4 billion is the planned spending on healthcare for 2021/22 (out of which £22.4 will be used to fight with Covid-19).
~3% is the average annual increase in core funding (i.e. excluding the extra funding for Covid-19) for the NHS. Annual increases in funding are necessary to adjust the budget to inflation, keep on improving the NHS and cater for the ever-increasing health challenges (like those brought by the ageing population - for a more detailed explanation check the ageing population questions below).
~10% is the percentage of GDP (i.e. of all the money added to the economy given year) the UK spends on healthcare. To put that figure in context, it is around the average for European countries - nations like Sweden, France or Germany spend close to 12% on healthcare, while Hungary, Greece or Poland around 8%.
"England | Commonwealth Fund" - a detailed article about how the financial resources flow through the NHS