Your dental practice profit and loss account is one of the most important financial documents you review each year. Yet many UK dentists struggle to extract meaningful insight from what can look like a wall of numbers.
A well-prepared P&L tells the story of your practice's financial performance over a period. Once you know how the page is built, where the revenue comes from, how the cost lines stack up, and which subtotals actually matter, you can spot problems early, plan for growth, and have a far sharper conversation with your accountant.
The shape of a dental P&L
Almost every dental practice P&L follows the same top-to-bottom logic. Income sits at the top. Below it come the direct clinical costs of delivering treatment, which gives you gross profit. Then the running costs of the practice are deducted to reach operating profit and EBITDA. Finally, if you trade through a company, depreciation, interest and tax bring you down to the bottom line.
The single most useful habit is to read the P&L as a set of ratios, not just a column of pounds. Every line means more when expressed as a percentage of total income, because that is how you compare this year to last, your practice to a benchmark, and one site to another. The sample structure below shows the lines a typical mixed UK practice carries, with illustrative percentages of revenue rather than amounts.
A sample dental practice P&L structure
These percentages are illustrative and describe a reasonably healthy mixed NHS and private practice. Your own figures will differ with your NHS to private mix, location, and whether you own or rent your premises, but the shape is the thing to learn.
| P&L line | Illustrative % of total income |
|---|---|
| NHS contract income | ~45% |
| Private treatment income | ~40% |
| Plan and membership income | ~10% |
| Other income (hygiene, sundry) | ~5% |
| Total income | 100% |
| Associate fees | ~22% |
| Hygienist and therapist fees | ~5% |
| Laboratory fees | ~6% |
| Materials and consumables | ~6% |
| Total direct clinical costs | ~39% |
| Gross profit | ~61% |
| Practice staff salaries (non-clinical and nursing) | ~20% |
| Premises (rent, rates, utilities, insurance) | ~8% |
| Marketing, IT and telephone | ~3% |
| Professional fees and indemnity | ~3% |
| Repairs, maintenance and other overheads | ~5% |
| Total overheads | ~39% |
| EBITDA | ~22% |
| Depreciation and amortisation | ~3% |
| Interest and finance costs | ~2% |
| Profit before tax | ~17% |
Read down the table and you can see the journey: revenue at the top, direct costs stripped out to give gross profit, overheads stripped out to give EBITDA, and then the non-cash and financing items that take you to profit before tax. Each section below explains what to look for in those lines.
The income lines
Dental revenue is rarely one number. A mixed practice usually splits it into four streams, and the split itself is a strategic signal.
- NHS contract income: payments under the GDS or PDS contract, driven by Units of Dental Activity against the contracted target. Watch for any year-end reconciliation adjustment. Under-delivering by more than 4 per cent of the contracted activity can trigger clawback of the unearned portion, which depresses recognised income.
- Private treatment income: fee-per-item private work, the stream with the most growth headroom and the most pricing control.
- Plan and membership income: recurring revenue from patient payment plans, valued because it is predictable and smooths cash flow.
- Other income: hygiene appointments billed directly, sundry sales, and similar items.
The first thing to read here is the NHS to private income mix. There is no single right answer, but the direction of travel year on year tells you whether the practice is shifting towards higher-margin private work or leaning harder on the NHS contract. Note too that patient charges collected on NHS treatment count towards the contract value rather than adding to it, so do not double-count them as extra income.
The direct clinical cost lines
Direct costs are the expenses that rise and fall directly with clinical activity. Strip them from income and you have gross profit, the cleanest measure of how efficiently the practice converts treatment into margin.
- Associate fees: typically around 45 to 50 per cent of the income each associate generates. This is usually the largest single cost line and the one most worth scrutinising.
- Hygienist and therapist fees: where these clinicians are paid on a similar split.
- Laboratory fees: crowns, dentures, bridges and other lab work.
- Materials and consumables: everything from composite and impression material to gloves and sterilisation supplies.
One point catches owners out. Because the supply of dental care is exempt from VAT under VATA 1994 Schedule 9 Group 7, a clinical practice generally cannot reclaim the input VAT on its lab fees, materials and consumables. Those cost lines are therefore VAT inclusive. A standard-rated business would show these costs net and recover the VAT, so a like-for-like comparison with a non-dental business overstates how lean a dental practice looks. It also means a few per cent of every materials and lab pound is irrecoverable VAT baked into the figure on the page.
The overhead lines
Overheads are the cost of keeping the doors open whether or not a single patient walks in. They are the second big block beneath gross profit.
- Practice staff salaries: nurses, reception and management, usually the largest overhead.
- Premises: rent, business rates, utilities and buildings or contents insurance.
- Marketing, IT and telephone.
- Professional fees and indemnity: accountancy, legal, and practice-level insurance.
- Repairs, maintenance and other overheads.
For a deeper treatment of which overheads to attack and how to benchmark each one, see our guide to dental practice overhead costs and how to control them. On the P&L itself, the line to keep half an eye on is staff salaries, which tend to climb faster than income unless actively managed.
The subtotals that matter
Three subtotals carry most of the meaning in a dental P&L. Learn to find them quickly.
Gross profit
Total income minus direct clinical costs, expressed as a percentage of income. A healthy mixed practice typically lands at 60 to 70 per cent. Below 55 per cent and you should look hard at associate splits that have crept up, rising lab bills, or loose materials purchasing.
EBITDA
Earnings before interest, tax, depreciation and amortisation. EBITDA strips out financing structure and non-cash charges, so it shows the underlying trading profit the practice produces. It matters most because it is the figure a buyer values a practice on, after normalisation for owner remuneration and one-off items. If you are within a couple of years of selling, EBITDA is the number to grow. Our guide to normalising dental practice EBITDA for valuation walks through the add-backs and adjustments that turn reported EBITDA into the sustainable earnings a valuation rests on.
Profit before tax and the bottom line
Take depreciation, amortisation and interest off EBITDA and you reach profit before tax. If the practice trades through a limited company, corporation tax is deducted below this line. For the financial years 2025 and 2026 the small profits rate is 19 per cent on profits up to £50,000, the main rate is 25 per cent on profits above £250,000, and marginal relief tapers the effective rate in between. A sole trader or partnership P&L usually stops at net profit, because the owner pays income tax and Class 4 National Insurance personally rather than through the practice accounts.
What good looks like, as ratios
Benchmarks turn raw numbers into judgements. The figures below are broad ranges for UK dental practices, and they shift with location, premises tenure and NHS to private mix, so treat them as a starting point rather than a target to hit exactly.
- Gross profit margin: 60 to 70 per cent of income
- Practice staff costs (excluding clinicians): 15 to 25 per cent of income
- Premises (rent and rates): 6 to 10 per cent of income
- EBITDA margin: roughly 15 to 25 per cent of income for a well-run practice
A central London private practice and a rural NHS-focused surgery will sit at different points in every one of these ranges, and both can be perfectly healthy. The comparison that tells you most is your own practice against its own prior years.
Reading the P&L for trends and red flags
A P&L read in isolation is a snapshot. Read across periods it becomes a diagnosis. A handful of patterns should always prompt a closer look.
Income drifting down
Month-on-month or year-on-year income decline needs attention now, not at the next year-end. It can flag an associate departure, a reduced NHS contract position, or rising local competition.
Associate splits creeping up
If associate fees are edging above 50 per cent of the income those associates generate, profitability is being squeezed. This usually happens gradually as individual deals are renegotiated, so it is easy to miss without tracking the percentage over time.
Overhead creep
Small rises across several overhead lines compound quickly. Staff costs in particular tend to outpace income if they are not actively reviewed against revenue each quarter.
Common mistakes when reading a P&L
Even experienced owners trip on the same few things.
Reading only the bottom line
Net profit matters, but the route to it carries the real information. A practice can post a respectable profit while masking a weak income mix or slack cost control that will catch up with it.
Ignoring seasonality
NHS activity often runs heavier in some quarters than others, and private work can dip during school holidays. Comparing a quiet August to a busy October produces a misleading swing. Compare like-for-like periods, or use a rolling 12-month view to wash the seasonality out.
Forgetting accruals
Your P&L includes accrued income (work done but not yet billed or paid) and accrued expenses (bills due but not yet paid). These timing differences mean the P&L is not the same as the bank balance, and reading it as if it were leads to false alarms about cash.
From the annual P&L to monthly insight
The annual statutory P&L is a historical record. The owners who use their numbers to drive decisions do not wait for it. They read monthly management accounts that carry the same structure in close to real time, which is where trends, cash collection problems and performance drift show up early enough to act on. Our guide to management accounts and the metrics to track sets out the monthly figures that matter and how to keep them in front of you.
Treat your P&L as a diagnostic tool rather than a filing requirement. Learn its shape, read its lines as percentages, watch the subtotals up to EBITDA, and compare against your own history and the broad benchmarks above. Do that consistently and the wall of numbers becomes a clear picture of what is working, what is not, and where the next opportunity sits. When the picture is complex, or you are heading towards a purchase or a sale, a specialist dental accountant can benchmark your figures and pressure-test the story they tell.