Capital allowances let you deduct some or all of the value of an item from your profits before you pay tax [1]. For a UK dental practice, this means the cost of chairs, X-ray machines, compressors, autoclaves, and other equipment can reduce your taxable profit pound for pound. The rules are specific, and the amounts you can claim depend on the type of asset and when you bought it.
This article works through a realistic capital allowances example for a dental practice. It covers what qualifies, how the Annual Investment Allowance (AIA) applies, what happens when you spend more than the AIA limit, and the common mistakes that cost practices money.
What Are Capital Allowances for a Dental Practice?
When you buy equipment for your practice, you do not deduct the full cost as an expense in your profit and loss account. Instead, the cost is capitalised on the balance sheet and depreciated over time. Capital allowances let you claim tax relief on that capital expenditure instead of relying on the accounting depreciation.
Most dental equipment qualifies as plant and machinery. This includes dental chairs, X-ray units (including OPG machines), compressors, suction units, autoclaves, computers, and practice management software. It also covers integral features such as electrical systems, air conditioning, and lifts, though these fall into a separate rate pool [2].
The key relief for most practices is the Annual Investment Allowance (AIA). You can claim up to £1 million on certain plant and machinery under the AIA [1][3]. This temporary limit is fixed until 31 March 2026 [2]. For a typical dental practice spending £50,000 to £150,000 on equipment in a year, the AIA covers the entire spend.
A Worked Capital Allowances Example: Dr Patel's Practice
Dr Patel owns a single-handed dental practice in the Midlands. In the 2025/26 tax year, she decides to refurbish her treatment room and replace several key items. She buys the following assets in May 2025:
- Two new dental chairs with integrated delivery systems: £28,000
- One digital OPG X-ray machine: £22,000
- One intraoral scanner: £15,000
- One compressor and suction unit: £8,000
- One autoclave: £4,500
- Practice management software licence (capitalised): £3,500
- New computer and server: £4,000
Total capital expenditure: £85,000. All items are new and qualify as plant and machinery for the main rate pool.
Because the total spend is well under the £1 million AIA limit, Dr Patel can claim 100% of the £85,000 as a capital allowance in the 2025/26 tax year. Her taxable profit reduces by £85,000. If she is a higher-rate taxpayer (40%), this saves her £34,000 in income tax. If the practice is a limited company paying 19% corporation tax, the saving is £16,150.
This is the simplest capital allowances example. The relief is immediate and substantial.
What Happens When You Spend More Than the AIA Limit?
If Dr Patel had spent £1.2 million on equipment in the same year, the AIA would cover the first £1 million. The remaining £200,000 would go into the main rate pool and qualify for writing-down allowances at 18% per year on a reducing balance basis [2].
In year one, she would claim £1 million under AIA plus £36,000 (18% of £200,000) as a writing-down allowance. The remaining £164,000 carries forward to the next year, when she claims 18% of that balance, and so on.
For most dental practices, spending over £1 million on equipment in a single year is rare. The AIA limit is generous enough to cover even a full practice fit-out. But if you buy a practice that includes existing equipment, the rules differ.
Buying a Practice with Existing Equipment: The Section 198 Election
When you buy a dental practice as a going concern, the purchase price typically includes goodwill, property, and equipment. The equipment element qualifies for capital allowances, but you need to agree a value with the seller. This is done through a joint election under Section 198 of the Capital Allowances Act 2001.
Without this election, the seller keeps the capital allowance value of the equipment, and the buyer gets no relief. With the election, the buyer can claim capital allowances on the agreed equipment value. The seller loses the right to claim those allowances on the same assets.
In practice, the buyer and seller negotiate a split of the purchase price between goodwill, property, and equipment. The equipment value should reflect market value, not an inflated figure. HMRC can challenge unrealistic allocations.
If you are buying a practice, ensure your solicitor and accountant include the Section 198 election in the sale contract. Missing this step can cost you tens of thousands of pounds in lost tax relief over the life of the equipment.
What Does Not Qualify for Capital Allowances?
Not everything in a dental practice qualifies. Land and buildings do not qualify for plant and machinery allowances, though the Structures and Buildings Allowance (SBA) gives 3% per year on qualifying construction or acquisition costs of commercial premises built or bought after 29 October 2018 [4].
Cars are a separate category. A practice car used for business qualifies for capital allowances, but the rate depends on its CO2 emissions. Zero-emission cars get 100% first-year allowance until 31 March 2025 [2]. Higher-emission cars go into the special rate pool at 6% writing-down allowance.
Items used only for residential property (such as a flat above the practice) do not qualify unless they are in communal areas of a building with multiple residential units [1][3].
If you use the cash basis as a sole trader or partnership, you can only claim capital allowances on business cars [3]. Most dental practices use accruals accounting, so this restriction rarely applies.
Capital Allowances on Integral Features
Some items in a practice are integral features rather than standard plant and machinery. These include electrical systems, cold water systems, heating and ventilation, lifts, and external solar shading. Integral features go into the special rate pool and attract writing-down allowances at 6% per year on a reducing balance basis [2][4].
If Dr Patel's refurbishment included rewiring the treatment room (£12,000) and installing a new air conditioning system (£8,000), those costs would not qualify for AIA. They would go into the special rate pool. In year one, she claims 6% of £20,000 = £1,200. The remaining £18,800 carries forward.
This is slower relief than the 100% AIA on chairs and X-ray machines. It is worth planning your expenditure to maximise AIA on items that qualify, and accepting the slower relief on integral features.
Full Expensing and First-Year Allowances
From 1 April 2023, companies can claim full expensing on qualifying plant and machinery investments [1][3]. This means 100% relief in the year of purchase, with no cap. Full expensing applies to companies only, not to sole traders or partnerships.
For a dental practice run as a limited company, full expensing is even more generous than the AIA because there is no £1 million cap. However, full expensing only applies to new assets, not second-hand ones. The AIA covers both new and used equipment.
From 1 January 2026, a 40% first-year allowance will be available for qualifying plant and machinery [1][3]. This is less generous than the current AIA but may be relevant for practices that exceed the AIA limit.
The super-deduction (130% first-year allowance for companies) ended on 31 March 2023 [2]. Do not try to claim it now.
Common Mistakes in Claiming Capital Allowances
The most common mistake is failing to claim at all. Many dentists treat equipment purchases as simple expenses in their accounts, which means they miss the capital allowance claim. If your accountant capitalises the asset and adds depreciation, you need a separate capital allowance computation to get the tax relief.
Another mistake is claiming capital allowances on items that are already expensed. If you have already deducted the full cost as a revenue expense (for example, small tools or consumables), you cannot also claim a capital allowance on the same item.
A third mistake is ignoring the Section 198 election when buying a practice. Without it, you lose the right to claim allowances on the equipment you just bought. This is a permanent loss, not a timing difference.
Finally, some practices claim capital allowances on buildings or building improvements that do not qualify. The SBA gives 3% relief, but only on qualifying costs and only for buildings acquired or constructed after 29 October 2018 [4]. Older buildings do not qualify for any capital allowance relief on the structure itself.
How to Claim Capital Allowances
You claim capital allowances in your tax return or company tax return. For a sole trader or partnership, include the claim in the capital allowances section of the self-assessment return. For a limited company, include it in the corporation tax return (CT600).
You need to keep records of the purchase invoices, dates, and descriptions of each asset. If you make a Section 198 election, keep a copy of the election form and the sale contract.
If you are unsure whether an item qualifies, check the HMRC guidance or speak to a dental-specialist accountant. The rules on integral features, cars, and buildings are detailed, and getting them wrong can lead to HMRC enquiries.
For a full review of your practice's capital allowance position, including past years where claims may have been missed, consider a specialist capital allowances review. Many practices have unclaimed allowances from previous years that can be corrected by amending earlier returns.
Summary
Capital allowances are one of the most valuable tax reliefs available to a dental practice. The AIA gives 100% relief on most equipment up to £1 million. Writing-down allowances give ongoing relief on items that exceed the AIA limit or fall into the special rate pool. The Section 198 election is critical when buying a practice with existing equipment.
This capital allowances example shows how a typical practice can save tens of thousands of pounds in tax by getting the claim right. The key is to identify every qualifying asset, use the correct rate pool, and keep proper records.
If you are planning a practice refurbishment, buying a practice, or simply replacing equipment, talk to a dental-specialist accountant before you spend the money. The timing and structure of your purchases can affect how much relief you get and when.
For more guidance on practice accounting and tax planning, see our services page. If you are an associate looking at capital allowances on equipment you provide yourself, read our associate tax guide. Practice buyers should review the practice purchase due diligence guide for more on Section 198 elections and asset allocation.
Sources
- gov.uk: Claim capital allowances: Overview - GOV.UK
- icaew.com: Capital allowances | Tax - ICAEW.com
- aka.hmrc.gov.uk: Claim capital allowances: Overview - GOV.UK
- accaglobal.com: Maximising capital allowances relief - ACCA Global