Running a private or mixed dental practice means making a string of connected financial decisions, and the tax treatment of each one feeds the next. How you are structured shapes how you take money out. How you take money out shapes your NHS pension. Your private and cosmetic income shapes your VAT position. Your fit-out spend shapes your capital allowances. And how you have set all of that up shapes the tax when you eventually sell.
This guide is the overview. It walks through the whole picture at current 2026/27 rates so you can see how the pieces fit, then links you to the detailed guide for each area. It applies whether you run wholly private, wholly NHS or a mixed list, and whether you trade as a sole trader, partnership, LLP or limited company.
The headline rates at a glance (2026/27)
These are the numbers that drive most practice tax planning this year. Use them as a reference point, then read the relevant section below for the detail.
| Tax | 2026/27 position |
|---|---|
| Corporation tax | 19% up to £50,000 profit, 25% over £250,000, marginal relief between |
| Dividend tax | 10.75% ordinary, 35.75% upper, 39.35% additional, after a £500 allowance |
| National Insurance | Employer 15% above the £5,000 secondary threshold; employee 8% main rate; self-employed Class 4 6% then 2%; Class 2 abolished from 6 April 2024 |
| VAT | Dental care exempt; £90,000 registration threshold on taxable (non-exempt) turnover only |
| Capital allowances | AIA £1m; main-rate writing-down allowance 18% reducing to 14% from April 2026; special rate 6%; 40% first-year allowance on new main-rate plant |
| Business Asset Disposal Relief | 14% on qualifying gains to 5 April 2026, then 18%, up to a £1m lifetime limit |
| Capital gains tax (main rates) | 18% and 24%, after a £3,000 annual exempt amount |
| Pension annual allowance | £60,000, tapering for high earners to a £10,000 floor |
Every dividend, allowance and threshold above is tagged to 2026/27 and several changed for this tax year, so treat figures from older guides with caution.
Choosing your structure
The first decision is whether to trade as a sole trader or partnership, as an LLP, or through a limited company. A sole trader or partnership pays income tax and Class 4 National Insurance on the profit share, keeps the admin simple, and stays fully NHS-pensionable on NHS-derived profit. An LLP gives the same personal taxation with limited liability, which often suits two to four principals. A limited company pays corporation tax and the owner extracts a salary plus dividends, but loses NHS pension accrual on the dividend portion.
At typical principal profit levels the pure tax saving from incorporating is small, and the 6 April 2026 dividend rate rise narrowed it further. The real drivers are usually pension flexibility, retained earnings for reinvestment, genuine spouse employment and sale planning, not a headline tax win. The single most important point, and the one most generic guides miss, is that incorporation cuts your NHS pension because dividends are not pensionable. You have to weigh the tax saving against that accrual loss, never look at the tax in isolation.
Our full comparison, with a worked example at 2026/27 rates and the pension trap set out in detail, is in sole trader vs limited company for dentists.
Taking money out of the company
If you do incorporate, the next question is how to extract profit efficiently. The classic approach pairs a modest salary with dividends. A one-director company often sets salary at the £5,000 secondary threshold (or near it) rather than the full personal allowance, because the Employment Allowance is not available to a company whose only employee is a single director. A genuinely employed spouse can change that answer. The lower earnings limit of £6,708 still preserves your state-pension and NHS-officer entitlement.
Dividends are then taxed at 10.75% in the basic band, 35.75% in the higher band and 39.35% in the additional band for 2026/27, after the £500 dividend allowance. Two further levers matter. Employer pension contributions are one of the most efficient routes out: deductible for corporation tax on a paid basis, with no National Insurance, subject to your annual allowance. And director's loan accounts need care, because an overdrawn loan triggers a section 455 charge at the dividend upper rate (35.75% on loans made on or after 6 April 2026), repayable once the loan is cleared.
The full salary, dividend, pension and director's-loan strategy, with a worked 2026/27 case, is in dental practice profit extraction.
Your VAT position
This is where private dental practices catch people out. The supply of dental care, NHS or private, is exempt from VAT under Schedule 9 Group 7 of the VAT Act 1994 when made by a registered dentist or dental care professional. Exempt is not the same as zero-rated: you do not charge VAT to patients, but you generally cannot reclaim the VAT on your costs either, so input VAT becomes a real expense.
The complication is cosmetic and aesthetic work. Purely cosmetic treatment with no therapeutic purpose, the classic watch-items being facial aesthetics and tooth whitening sold for appearance alone, is standard-rated. Build up enough of that taxable turnover and you cross the £90,000 VAT registration threshold, which counts taxable (non-exempt) turnover only, not your exempt dental income. Once registered with a mix of exempt and taxable supplies you run partial exemption, recovering only the input VAT attributable to your taxable side, with a de minimis test that can still let small amounts through. Significant property or equipment spend can also pull you into the Capital Goods Scheme.
Most practices should walk the principal-purpose test on any borderline treatment with their accountant before assuming it is exempt, because getting the cosmetic line wrong is both a registration risk and a recovery question.
Claiming for equipment and your fit-out
Surgery equipment and premises improvements attract capital allowances. The Annual Investment Allowance gives 100% first-year relief on up to £1m of qualifying plant and machinery each year, which covers most chairs, X-ray units, autoclaves and compressors. A fit-out splits between general plant (the main-rate pool) and integral features such as electrical, water, heating and ventilation systems (the special-rate pool).
Two 2026 changes matter. The main-rate writing-down allowance falls from 18% to 14% from April 2026 under Finance Act 2026, while the special-rate pool stays at 6%. And a new 40% first-year allowance on new (not second-hand) main-rate plant is available, sitting alongside the AIA. When you buy a practice that includes fixtures, a section 198 election fixes the value attributed to those fixtures between buyer and seller, and it has a strict two-year deadline. Missing it forfeits your fixtures allowances permanently, which is one of the most common preventable losses on a practice purchase. Capital allowances and the goodwill-versus-tangibles split also interact directly with sale planning, covered below.
The NHS pension question
If any of your income is NHS-derived, the NHS Pension Scheme is part of your financial picture even in an otherwise private practice. All active members now accrue in the 2015 CARE section (1/54th of each year's pensionable earnings, revalued at CPI plus 1.5% while active), with the 1995 and 2008 sections as legacy service. The annual allowance is £60,000, measured for a defined-benefit scheme on the growth in your pension (the pension input amount), not the contributions paid. It tapers for high earners down to a £10,000 floor, and Scheme Pays can settle a charge out of the scheme where one arises.
The decision that links straight back to structure is the incorporation pension trap: for an incorporated principal taking a salary, only that salary is pensionable, and dividends are not pensionable. Switching a large slice of pensionable profit into dividends can quietly cost tens of thousands of pounds of accrual over a run to retirement. (Incorporated GDS or PDS contract-holding providers have a more favourable position, able to pension drawn income up to a net-pensionable-earnings ceiling, but for an incorporated associate the dividend trap is the default.)
How tax relief, the annual allowance, taper, Scheme Pays, carry-forward and AVCs work for dentists, with a 2026/27 worked example, is set out in dentist pension contributions and tax relief.
Employing your team
Once you employ staff, whether a nurse, a practice manager or a genuinely employed spouse, you take on three connected obligations: PAYE and Real Time Information payroll, the employer cost of the wage, and pension auto-enrolment. The true cost of an employee is always more than the headline salary. On top of the wage sits employer National Insurance at 15% on earnings above the £5,000 secondary threshold (net of the £10,500 Employment Allowance, available where you have genuine non-director staff), plus the minimum employer pension contribution of 3% of qualifying earnings under auto-enrolment, plus payroll running costs and other on-costs. Always budget the loaded cost, not the salary alone. Small staff perks can be given free of tax under the trivial benefits rules, though a close-company director is capped at £300 a year.
Records, self-assessment and Making Tax Digital
Good digital records are now a compliance requirement, not just good practice. Unincorporated dentists file Self Assessment, pay Class 4 National Insurance at 6% then 2% (Class 2 was abolished from 6 April 2024), and make payments on account each January and July. The change to plan for is Making Tax Digital for Income Tax, mandatory from 6 April 2026 for sole traders and landlords with qualifying income over £50,000, then £30,000 from April 2027 and £20,000 from April 2028. Most full-time associates and unincorporated principals are caught from April 2026 and will need to keep digital records and file quarterly updates. Limited companies are outside this regime because it applies to income tax, not corporation tax.
Who is in scope, how quarterly updates and digital records work, and how MTD for Income Tax differs from MTD for VAT, are covered in Making Tax Digital for dental practices.
Planning the eventual sale
When you sell, the gain is liable to capital gains tax after the £3,000 annual exempt amount, at main rates of 18% and 24%. The relief to plan around is Business Asset Disposal Relief, which cuts the rate on qualifying gains up to a £1m lifetime limit. The rate is 14% for disposals up to 5 April 2026 and 18% from 6 April 2026, so the date of disposal is a live planning lever for completions around that step. Qualifying conditions, including the 5% shareholding and officer-or-employee tests for a share sale, must be met throughout the two years to disposal, which is why sale planning needs roughly 24 months of lead time.
Goodwill is usually the bulk of the price, and how the price is apportioned between goodwill and tangible assets affects both sides of the deal. The full mechanics, the annual exempt amount, where BADR fits and how the gain is reported, are in capital gains tax when selling a dental practice.
Mixed NHS and private practices
A practice that does both NHS and private work carries extra complexity: VAT partial exemption between exempt dental care and any standard-rated cosmetic work, sensible apportionment of shared costs, and management accounts that actually separate the two income streams so you can see what each contributes. Reporting that reflects how dentistry really runs, and feeds cleanly into year-end tax work, is covered in making NHS and private dental accounts useful.
Bringing it together
The thread running through all of this is that the decisions interlock. Structure drives extraction, extraction drives your pension, your treatment mix drives VAT, your spend drives allowances, and the whole set-up drives the tax on sale. The headline rates above are the starting point, but the value is in how they combine for your particular practice, your income mix and your timeline.
Because so many of these levers are time-sensitive in 2026/27, the dividend rise, the BADR step, the writing-down allowance reduction and the arrival of Making Tax Digital, it is worth reviewing the full picture with a specialist dental accountant rather than each piece in isolation, particularly before incorporating, taking on staff, making large equipment purchases or planning an exit.