If you operate your dental practice through a limited company, corporation tax is one of your key tax obligations. Unlike associate dentists who pay income tax through Self Assessment, limited companies pay corporation tax on their profits.

This guide explains how corporation tax works for dental limited companies, covering rates, deadlines, and the CT600 filing process.

What is Corporation Tax?

Corporation tax is the tax that limited companies pay on their taxable profits. For dental practices, this includes profits from both NHS and private work, minus allowable business expenses.

Your company pays corporation tax before you extract any profits as dividends or salary. This is different from sole traders or partnerships, where profits are taxed as personal income.

Current Corporation Tax Rates

Corporation tax rates for dental limited companies depend on your profit levels:

  • Small profits rate: 19% on profits up to £50,000
  • Marginal rate: Tapered rate between £50,000 and £250,000
  • Main rate: 25% on profits over £250,000

For example, a single-dentist practice making £80,000 profit would pay 19% corporation tax on the first £50,000 and a marginal rate on the remaining £30,000.

These rates apply to accounting periods starting from 1 April 2023. Earlier periods may use different rates.

When Corporation Tax is Due

Corporation tax must be paid within nine months and one day of your company's year-end. If your accounting period ends on 31 March, payment is due by 1 January the following year.

Large companies (profits over £1.5 million) must pay quarterly instalments, but this rarely affects dental practices.

Late Payment Penalties

HMRC charges interest on late corporation tax payments from the day after the due date. Current rates are typically 7-8% annually, making prompt payment essential.

The CT600 Company Tax Return

Every dental limited company must file a CT600 company tax return, even if no corporation tax is due. This return is separate from your annual accounts filing at Companies House.

The CT600 filing deadline is 12 months after your accounting period ends. However, you must pay any corporation tax due much earlier - within nine months and one day.

What Information Goes in CT600

The CT600 includes details of your company's:

  • Total income and profits
  • Allowable expenses and deductions
  • Tax computations and calculations
  • Any reliefs or allowances claimed

Most dental practices use accountants to prepare their CT600, as the calculations can be complex.

Calculating Taxable Profits

Your corporation tax bill is based on taxable profits, not your accounting profit. Common adjustments for dental practices include:

  • Adding back depreciation (replaced by capital allowances)
  • Removing non-deductible expenses like client entertaining
  • Claiming capital allowances on equipment purchases
  • Adjusting for any private use of company assets

A dental practice showing £100,000 accounting profit might have £95,000 taxable profit after these adjustments.

Capital Allowances for Dental Equipment

Dental companies can claim capital allowances on equipment purchases, reducing corporation tax. The Annual Investment Allowance currently allows 100% deduction on qualifying purchases up to £1 million per year.

This means buying a £15,000 dental chair gives immediate tax relief, potentially saving £2,850 in corporation tax (at 19% rate).

Corporation Tax and Profit Extraction

Corporation tax directly affects how efficiently you can extract profits from your dental company. Different profit extraction strategies have varying corporation tax implications.

Taking profits as salary avoids corporation tax but creates higher National Insurance costs. Dividends are paid from post-corporation tax profits but face lower personal tax rates.

Example: £80,000 Profit Extraction

A dental company with £80,000 profit could extract this as:

  • All salary: No corporation tax, but £11,000+ in employer National Insurance
  • Salary plus dividends: Corporation tax of around £6,500, plus personal tax on dividends

The optimal mix depends on your personal circumstances and other income sources.

Record Keeping for Corporation Tax

Dental limited companies must maintain detailed records for corporation tax purposes. HMRC requires you to keep records for six years from the end of the accounting period.

Essential records include:

  • All income records (NHS statements, private receipts)
  • Expense receipts and invoices
  • Bank statements and accounting records
  • Equipment purchase documentation
  • VAT records if VAT registered

Common Corporation Tax Issues for Dental Practices

Dental limited companies often face specific corporation tax challenges:

Mixed NHS and Private Income

Companies with both NHS contracts and private work need careful record-keeping to ensure all income is captured correctly. Managing mixed NHS and private accounting requires attention to different payment timings and methods.

Laboratory Costs

Dental laboratory expenses can be substantial. These are typically allowable deductions, but proper documentation is essential to support your corporation tax return.

Professional Indemnity and Insurance

Insurance premiums for dental practices are allowable expenses, reducing your corporation tax bill. This includes professional indemnity, public liability, and building insurance.

Corporation Tax Planning for Dental Companies

Effective corporation tax planning can reduce your overall tax burden while maintaining cash flow. Key strategies include:

  • Timing equipment purchases to maximise capital allowances
  • Managing profit extraction to optimise total tax costs
  • Considering pension contributions to reduce corporation tax
  • Planning major expenses around year-end timing

Year-End Planning

The months before your accounting year-end offer corporation tax planning opportunities. Bringing forward planned equipment purchases or delaying certain income can help manage your tax position.

Getting Professional Help

Corporation tax compliance for dental limited companies involves complex calculations and strict deadlines. Most dental companies work with specialist accountants who understand the sector's specific requirements.

Professional help is particularly valuable when:

  • Filing your first CT600 return
  • Planning profit extraction strategies
  • Making significant equipment investments
  • Considering practice acquisitions or expansions

If you need guidance on corporation tax for your dental limited company, contact our specialist team for advice tailored to your situation.