How Does the Statement of Dental Remuneration (SDR) Work for NHS Dental in Scotland?

What is the Statement of Dental Remuneration (SDR)?

The Statement of Dental Remuneration (SDR) is the contractual framework that governs how NHS dental services are paid for in Scotland. If you practise NHS dentistry in Scotland, the SDR determines every aspect of your NHS income: what treatments you can claim for, how much each treatment is worth, and what rules apply to patient registration and continuing care.

Unlike the NHS dental contract in England, which is built around Units of Dental Activity (UDAs) and a banded fee system, the SDR operates on a fundamentally different principle. It is an item-of-service system, meaning you are paid for each specific treatment you provide, with a set fee for each item. This distinction is critical for any dentist working in Scotland, whether you are a practice owner, an associate, or a locum.

The SDR is formally issued by the Scottish Government and is updated periodically, typically with annual changes to fee levels and occasionally more significant structural amendments. It applies to all NHS general dental practitioners (GDPs) in Scotland who hold a contract with a Health Board.

How the SDR Differs from the English UDA System

The most common point of confusion for dentists moving between England and Scotland is the difference between UDAs and the SDR. In England, NHS dental contracts are built around UDAs. Each contract specifies a target number of UDAs to be delivered per year, and the practice is paid a fixed sum per UDA, regardless of the actual treatment provided. A simple examination might count as 1 UDA, while a complex course of treatment might count as 3 or 12 UDAs, depending on the band.

In Scotland, there are no UDAs. Instead, the SDR lists hundreds of individual treatment items, each with a specific fee. For example, an examination has a set fee, a scale and polish has a set fee, a two-surface amalgam filling has a set fee, and so on. You claim for each item you provide, and the total payment is the sum of those individual fees, subject to certain caps and rules.

This item-of-service model gives Scottish dentists a more direct link between the work they do and the income they generate. However, it also means that practice income is more variable and depends on the volume and mix of treatments provided, rather than on a fixed UDA target.

Key Components of the SDR

Item of Service Fees

The core of the SDR is the item-of-service fee schedule. This is a comprehensive list of all NHS treatments that can be claimed, each with a specific fee. The schedule is divided into sections covering examinations, radiographs, fillings, crowns, dentures, root canal treatments, periodontal treatment, oral surgery, and many others.

Each item has a code and a fee. For example, an examination (code 0101) might have a fee of around £20, while a simple extraction (code 1101) might be around £30. Complex treatments such as a metal-ceramic crown (code 0601) might be £150 or more. The exact fees are updated annually by the Scottish Government and are published in the SDR document.

It is important to note that some items have restrictions. For instance, a scale and polish (code 0201) can only be claimed once per patient per 6-month period. Similarly, a full-mouth radiograph survey (code 0303) has a specific claim frequency limit. Understanding these rules is essential to avoid incorrect claims that could lead to clawbacks or compliance issues.

Capitation and Continuing Care Payments

In addition to item-of-service fees, the SDR includes capitation and continuing care payments. These are periodic payments made for each registered patient, intended to cover the cost of maintaining the patient's oral health and providing ongoing care.

Capitation payments are made for children (under 18) and are calculated based on the patient's age and the practice's capitation band. Continuing care payments are made for adult patients who are registered with the practice. These payments are typically lower than the item-of-service fees but provide a stable, recurring income stream that helps smooth out the variability of treatment-based claims.

The exact capitation and continuing care rates are set out in the SDR and are adjusted annually. For a typical practice with a mixed patient list, these payments can represent a significant portion of total NHS income, often 20-30% or more.

Seniority Payments

The SDR also includes a seniority payment system for practice owners. This is an additional payment made to principals who have been providing NHS dental services for a certain number of years. The payment is calculated based on the principal's length of service and is intended to reward experience and retention in the NHS.

Seniority payments are not available to associates or locums. They are paid directly to the practice owner and are treated as part of the practice's NHS income. The rates are tiered, with higher payments for longer service. For example, a principal with 10 years of service might receive a seniority payment of several thousand pounds per year, while someone with 25 years might receive significantly more.

Other Allowances and Grants

The SDR also includes various allowances and grants. These include:

• Practice Allowance: A fixed annual payment to cover practice overheads, calculated based on the practice's list size and other factors.
• Rural Allowance: Additional payments for practices in remote or rural areas, intended to support access to NHS dental services in underserved locations.
• Vocational Training Grant: Payments for practices that host foundation dentists (formerly vocational trainees).
• Discretionary Grants: Health Boards may offer additional grants for specific purposes, such as practice improvements or recruitment incentives.

How Associates and Locums Are Paid Under the SDR

For associate dentists working in Scotland, the SDR directly affects how they are paid by the practice. Most associates in Scotland work on a fee-percentage basis, typically 40-55% of the NHS fees they generate. Because the SDR is an item-of-service system, the associate's income is directly tied to the volume and type of treatments they provide.

This is different from England, where associates often work on a UDA-based contract. In Scotland, an associate's earnings can vary significantly from month to month, depending on patient demand and the mix of treatments. This variability makes budgeting and tax planning particularly important for Scottish associates.

Locum dentists in Scotland also need to understand the SDR. If you are a locum working in an NHS practice, the practice will typically pay you a daily or session rate, rather than a fee-per-item. However, the practice's ability to pay that rate depends on the SDR income it generates. Locums working through a limited company should also be aware of IR35 considerations, as the engaging practice (if a medium or large entity) is responsible for determining your employment status under the off-payroll rules.

For more detailed guidance on associate tax and self-employment status, see our Associate Tax Survival Guide.

Tax and Accounting Considerations for Scottish Dental Practices

The SDR has several implications for tax and accounting that differ from the English system. Here are the key points to consider.

Income Recognition

Under the SDR, NHS income is recognised when the treatment is completed and the claim is submitted. For accounting purposes, most practices use an accruals basis, meaning income is recorded in the period the treatment was provided, even if the payment from the Health Board arrives later. This is standard practice but requires careful tracking of claims and payments.

Because the SDR involves many small claims, it is essential to have robust practice management software that can track claims and payments accurately. Errors in claiming or recording can lead to discrepancies in your accounts and potential issues with HMRC.

Expense Allocation

Practice expenses in Scotland are generally similar to those in England, but the mix of treatments can affect the cost base. For example, a practice that does a high volume of laboratory work (crowns, dentures) will have higher lab fees, which need to be factored into the associate fee split or practice profitability calculations.

Capital allowances on dental equipment (chairs, X-ray machines, autoclaves) are claimed in the same way as in England. The Annual Investment Allowance (AIA) of £1,000,000 is available for qualifying plant and machinery, including dental chairs, compressors, and X-ray units. If you are buying a practice, you may need a Section 198 election to claim allowances on fixtures purchased from the seller.

VAT on Dental Treatment

VAT treatment of dental services is the same across the UK. Treatment by a registered dental professional in the course of their profession is exempt from VAT under Schedule 9 Group 7 of the Value Added Tax Act 1994. This applies to both NHS and private treatment. However, purely cosmetic treatments without a medical purpose may be standard-rated. Tooth whitening is a known borderline area that HMRC scrutinises.

If your practice provides private cosmetic services, you should review your VAT position carefully. For more information, see our dental accountancy services page.

NHS Pension Scheme

Scottish dentists are members of the NHS Pension Scheme, which is administered by the NHS Business Services Authority (NHSBSA) for Scotland. The scheme operates on the same principles as the rest of the UK, with the 2015 CARE section being the current scheme for most members. The McCloud remedy applies equally to Scottish dentists, meaning those who had benefits in the 1995 or 2008 sections between 1 April 2015 and 31 March 2022 can choose at retirement which scheme rules apply to that period.

Pension contributions are based on your NHS pensionable earnings, which include item-of-service fees, capitation payments, and seniority payments. If you are a practice owner, you must ensure that your pension records are accurate and that you are not overpaying or underpaying contributions.

For a detailed guide, see our NHS Pension Scheme Essentials for Dentists.

Practical Tips for Managing SDR Income

Here are some practical steps to help you manage your finances under the SDR.

• Track your claims monthly. Use your practice software to generate reports showing the value of claims submitted each month. This helps you forecast income and identify any trends or issues.
• Budget for variability. Because SDR income depends on treatment mix, your monthly income can fluctuate. Build a cash reserve to cover slower months, and consider using a budgeting tool or working with a dental-specialist accountant to forecast your annual income.
• Review your fee split regularly. If you are an associate, ensure your fee percentage reflects the true cost of materials and lab work. Some practices deduct lab fees before calculating the associate's share, while others do not. Make sure you understand the arrangement.
• Plan for tax payments. Self-employed associates and locums in Scotland must make payments on account if their tax bill exceeds £1,000. This means paying 50% of your estimated tax bill on 31 January and 50% on 31 July. Budget for these payments throughout the year.
• Consider incorporation. Some Scottish dentists operate through a limited company for tax efficiency. This can be beneficial for profit extraction and pension planning, but it requires careful structuring and compliance with IR35 rules for locums. Speak to a specialist accountant before incorporating.

For practice owners, we also recommend using our Practice Valuation Calculator to understand the value of your practice under the SDR system. Goodwill valuations in Scotland follow similar principles to England, but the income stream is different, so a tailored approach is essential.

Common Questions About the SDR

Can I move from England to Scotland and keep my NHS contract?

No. NHS dental contracts are issued by individual Health Boards. If you move from England to Scotland, you will need to apply for a new contract with the relevant Scottish Health Board. Your English UDA contract will not transfer. You will also need to join the Performers' List for Scotland.

How are SDR fees updated?

The Scottish Government reviews SDR fees annually, usually with effect from 1 April. Fee changes are published in the SDR document and are typically based on recommendations from the Doctors' and Dentists' Review Body (DDRB). However, the government may decide to implement changes in full, in part, or not at all, depending on budget constraints.

What happens if I overclaim under the SDR?

Overclaiming can lead to clawbacks, where the Health Board recovers the overpaid amount. In serious cases, it can result in compliance investigations or referral to the General Dental Council (GDC). It is essential to have robust systems in place to ensure claims are accurate and comply with SDR rules.

Final Thoughts

The Statement of Dental Remuneration is a detailed and specific framework that governs NHS dental income in Scotland. Its item-of-service model offers a direct link between treatment and income, but it also requires careful management of claims, expenses, and tax obligations. Whether you are a practice owner, associate, or locum, understanding the SDR is essential for running a successful NHS dental practice in Scotland.

Because the SDR is unique to Scotland, generalist accountants who are not familiar with dental-specific tax issues may miss important opportunities or risks. Working with a dental-specialist accountant who understands the SDR, the NHS Pension Scheme, and the tax implications of item-of-service income can save you time, money, and stress.

If you would like to discuss your specific situation, contact our team of dental accountants who specialise in Scottish dental practices. We can help you with tax planning, practice valuation, associate contracts, and all aspects of dental finance.