Thousands of patients are likely to be refused dental treatment until the start of the new financial year in April due to a cash crisis in the health service.

Dentists in England were given new contracts last year which mean they are paid an annual income for an agreed number of check-ups and treatments. Those who were heading to complete their quota ahead of schedule expected to be able to negotiate payment for extra work, but they are now being told that there is no more money in the budget. If they treat any more NHS patients before the end of March, they will not be paid, which means thousands might be turned away.

The problem was exposed by Health Service Journal, which today publishes details of a Department of Health memo telling trusts to have "clear lines ready" to respond to media reports about the problem. The trusts should "ensure patients know how to access urgent care, and publicise spare capacity in other practices."

Pressure on dental budgets was exacerbated by inaccurate forecasting by the department of the number of patients who would be exempt from charges. A memo leaked last week showed the government expected £630m in income from charges, but less money was coming in. Exempt patients include children and pregnant women, people on benefits, some war pensioners and some on low incomes.

Under the contract, dentists provide an agreed number of "units of activity" (UDAs) at an agreed price over the year. A dentist earns one point for investigative work, three points for fillings and 12 points for treatment involving laboratory work.

Peter Ward, chief executive of the British Dental Association, said: "Three quarters of dentists don't believe the UDA target reflects the amount of treatment they are able to give.