I started the beyound death quest and started taking damage to health, but after I finished it and got the soul essence gem back and left the soul cairn I am still taking damage to health. It's improved my restoration alot but I'm having to use healing spell far too often! Is this a bug or am I missing something?

Any idea how to sort this out?

As far as I'm aware you don't take continual health damage when you choose to soul trap yourself to enter the cairne. Instead you take a reduction to your base health stat, which will persist until you find your soul stone.

That you're taking continual damage is odd, and I'd say a glitch. As to how to fix it? No idea. You could go back to a save just before you entered and re-run it, but that's the best I have. Sorry