When you buy or sell a dental practice in the UK, the total price is not a single lump sum. It is split into two distinct categories: goodwill and tangible assets. The proportion of the price allocated to goodwill is typically between 60% and 80% of the total, but the exact split depends on the practice's NHS/private mix, location, profitability, and the value of its physical equipment.

This article explains how the goodwill percentage is determined, why the split matters for tax purposes, and what buyers and sellers need to consider when agreeing the price allocation. We use real-world examples and the 2025/26 tax rules throughout.

What Is Goodwill in a Dental Practice Sale?

Goodwill is the intangible value of a practice that goes beyond its physical assets. It represents the reputation, patient list, location, established referral relationships, and the ongoing income stream that the buyer acquires. In a dental context, goodwill is often the largest single component of the purchase price.

For NHS practices, goodwill is closely linked to the value of the UDA contract and the performer list. For private practices, it reflects the recurring patient base and the brand. Mixed practices sit somewhere in between.

HMRC accepts that goodwill is a capital asset. When you sell a practice, the gain on goodwill is subject to Capital Gains Tax (CGT), not income tax. For the buyer, goodwill acquired after 1 April 2019 may qualify for tax relief at 6.5% per year under the Finance Act 2019 provisions.

Typical Goodwill Percentages by Practice Type

There is no single "correct" goodwill percentage. The split depends on the practice's characteristics. Based on typical UK dental transactions in 2024 and 2025, here are the rough ranges:

  • NHS-heavy practice (80%+ NHS income): Goodwill 60-70% of total price. Tangible assets 30-40%. The UDA contract is the primary driver of value, but the physical surgery and equipment still matter.
  • Mixed practice (50/50 NHS/private): Goodwill 65-75%. Tangible assets 25-35%. Private income adds premium to goodwill, but the practice still needs functional equipment.
  • Private practice (80%+ private income): Goodwill 70-80%. Tangible assets 20-30%. Private practices command higher goodwill multiples because patient loyalty and fee levels are less constrained by NHS contract terms.
  • Single-surgery or low-equipment practice: Goodwill could be 75-85% if the practice has minimal physical assets but strong patient flow.
  • Multi-surgery, high-equipment practice: Goodwill might drop to 55-65% if the practice has expensive digital scanners, OPG machines, or refurbished surgeries.

These percentages are guidelines. Every transaction is negotiated individually, and the final allocation must reflect the actual value of the assets being transferred.

Why the Goodwill Split Matters for Tax

The allocation between goodwill and tangible assets is not just an accounting formality. It has direct tax consequences for both buyer and seller.

For the Seller

When you sell a dental practice, the gain on goodwill is a capital gain. If you qualify for Business Asset Disposal Relief (BADR), the CGT rate is 14% in 2025/26 (rising to 18% from April 2026). The gain on tangible assets (chairs, X-ray units, computers) is also a capital gain, but those assets may have been depreciated in your accounts, meaning the base cost is lower and the gain higher.

If you sell the practice as a going concern (as a business, not as individual assets), the sale of goodwill and tangible assets together can qualify for BADR, provided you meet the conditions (owning the practice for at least 2 years, being a sole trader or partner or director/employee of the company).

Example: Dr Patel sells her mixed practice for £600,000. The agreed split is 70% goodwill (£420,000) and 30% tangible assets (£180,000). Her base cost for goodwill is £0 (she built it herself). Her base cost for tangible assets is £100,000 (original cost less depreciation). Her total gain is £500,000. With BADR at 14%, her CGT bill is £70,000 (subject to the £1m lifetime limit). If the split were 80/20, the gain on goodwill would be higher, but the overall tax position might be similar because both elements are capital gains.

For the Buyer

The buyer's tax treatment differs between goodwill and tangible assets. Tangible assets (dental chairs, X-ray units, compressors, computers) qualify for capital allowances. You can claim 100% relief under the Annual Investment Allowance (AIA) on most equipment, up to £1,000,000 per year. This means the cost of tangible assets can be written off against your taxable profits immediately.

Goodwill, by contrast, does not qualify for AIA. If the goodwill was acquired after 1 April 2019, you can claim a tax deduction of 6.5% of the cost each year (straight-line). This is much slower than the immediate relief on equipment.

Example: Dr Jones buys a practice for £800,000. The split is 75% goodwill (£600,000) and 25% tangible assets (£200,000). In year one, she can claim £200,000 of AIA on the equipment, reducing her taxable profit by that amount. She can also claim £39,000 (6.5% of £600,000) as a goodwill amortisation deduction. If the split were 60/40, she would get £320,000 of AIA in year one, but only £31,200 of goodwill relief per year. The buyer generally prefers a higher tangible asset allocation to accelerate tax relief.

How the Price Allocation Is Negotiated

The split between goodwill and tangible assets is agreed between buyer and seller as part of the sale and purchase agreement (SPA). Both parties have competing interests:

  • Seller: May prefer a higher goodwill allocation if they have low base cost in tangible assets, because goodwill gains are capital (not income) and qualify for BADR. However, if the seller has significant capital allowances already claimed on equipment, the tangible asset base cost may be low, making a higher tangible allocation less attractive.
  • Buyer: Generally prefers a higher tangible asset allocation to maximise AIA in year one. But the buyer must also consider that goodwill amortisation (6.5% per year) is slower relief. The buyer's accountant will model the tax impact of different splits.

In practice, the split is often driven by an independent valuation. A dental practice valuer will assess the fair market value of the tangible assets (using a depreciated replacement cost or market value approach) and allocate the remainder to goodwill. HMRC can challenge an allocation that seems artificial or tax-motivated, so the split must be commercially justifiable.

Tangible Assets: What Gets Valued?

Tangible assets in a dental practice typically include:

  • Dental chairs and delivery units
  • X-ray equipment (intraoral, OPG, CBCT)
  • Compressors and suction units
  • Autoclaves and sterilisation equipment
  • Computers, practice management software, servers
  • Furniture, fixtures, and fittings (reception desks, cabinetry)
  • Leasehold improvements (surgery fit-out, plumbing, electrical work)

Leasehold improvements are a common area of negotiation. If the seller has spent significant money on refurbishing the surgery, that cost is reflected in the tangible asset value. The buyer can claim capital allowances on qualifying fixtures (chairs, compressors, X-ray units) but not on the building itself. For leasehold improvements that are part of the building fabric (walls, floors, ceilings), the buyer may claim Structures and Buildings Allowance (SBA) at 3% per year if the construction was post-29 October 2018.

Common Pitfalls in Price Allocation

Several mistakes arise when dentists agree the goodwill split without professional advice:

1. Over-allocating to goodwill to reduce seller's tax. If the seller has a low base cost in tangible assets, they might push for a higher goodwill percentage. But if the buyer then cannot claim AIA on those assets, the buyer's tax position worsens. The deal must work for both parties.

2. Ignoring the s.198 election. When buying a practice with fixtures that the seller has already claimed capital allowances on, the buyer and seller must jointly elect under CAA 2001 s.198 to fix the value of those fixtures. Without this election, the buyer cannot claim capital allowances on those items. The election must be made within 2 years of the sale.

3. Assuming goodwill amortisation is automatic. Goodwill acquired before 1 April 2019 generally has no tax relief. Goodwill acquired between 8 July 2015 and 31 March 2019 is excluded from relief. Only goodwill on acquisitions after 1 April 2019 (and meeting the qualifying conditions) gets the 6.5% annual deduction. Check the date of your purchase.

4. Not getting a professional valuation. HMRC can challenge an allocation that seems unreasonable. If you allocate 90% to goodwill and 10% to tangible assets, HMRC may argue the tangible assets are undervalued and reallocate the price, potentially triggering additional tax and penalties. Always use a qualified dental practice valuer.

Worked Example: Dr Ahmed Buys a Practice

Dr Ahmed is buying a single-surgery NHS practice in the North of England. The agreed total price is £400,000. The practice has:

  • One dental chair (5 years old, market value £8,000)
  • One intraoral X-ray unit (3 years old, market value £4,000)
  • Compressor and suction (market value £3,000)
  • Autoclave (market value £2,000)
  • Computer and software (market value £1,000)
  • Furniture and fittings (market value £5,000)
  • Leasehold improvements (original cost £40,000, depreciated value £25,000)

Total tangible asset value: £48,000. The remaining £352,000 is goodwill (88% of the total). This high goodwill percentage reflects the fact that the practice has minimal equipment but a strong NHS contract and patient list.

Dr Ahmed's tax position in year one: he claims AIA of £48,000 on the tangible assets, reducing his taxable profit. He claims goodwill amortisation of £22,880 (6.5% of £352,000). His total first-year tax relief is £70,880.

If the tangible assets had been valued at £100,000 (e.g., if the practice had a new OPG machine and refurbished surgery), the goodwill would be £300,000 (75%). His year-one relief would be £100,000 AIA plus £19,500 goodwill amortisation = £119,500. The buyer benefits from a higher tangible allocation.

How to Get the Split Right

Both buyer and seller should engage a dental-specialist accountant and a practice valuer before agreeing the price allocation. The valuer will produce a detailed schedule of tangible assets with market values. The accountant will model the tax impact of different splits for both parties.

Key steps:

  • Obtain a professional valuation of tangible assets (not just a guess).
  • Agree the split in the SPA, not after completion.
  • Complete a s.198 election for fixtures if applicable.
  • Ensure the split is commercially justifiable, not purely tax-driven.
  • Document the basis for the allocation in case HMRC queries it.

For more detail on the valuation process, see our goodwill valuation and sale playbook. If you are buying a practice, our practice purchase financial due diligence guide covers the full process.

Final Thoughts

The goodwill percentage of a dental practice sale price typically falls between 60% and 80%, but the exact figure depends on the practice's asset base, income mix, and location. Getting the split right is not just about agreeing a number. It affects CGT for the seller, capital allowances and amortisation for the buyer, and the overall viability of the transaction.

Work with a dental-specialist accountant and a qualified valuer to ensure the allocation is both commercially sensible and tax-efficient. Every practice is different, and a one-size-fits-all approach can cost you thousands in unnecessary tax.

If you are considering buying or selling a dental practice, speak to our team. We provide practice valuation services and dental accounting tailored to your situation.