Many dental practice owners assume an audit is an unavoidable annual cost. For the great majority it is not. Whether your dental company needs a statutory audit turns on its size and structure under the Companies Act, not on whether you treat NHS or private patients. Almost every standalone dental practice qualifies for audit exemption, and the rules became more generous from 6 April 2025.
This guide sets out the test that actually decides the question, the uplifted small-company thresholds, the narrow situations where a dental company genuinely does need an audit, and the separate, non-statutory situations where someone might ask you for audited or independently examined accounts.
What a statutory audit actually is
A statutory audit is an independent examination of a company's finished financial statements, required by the Companies Act 2006 for any company that does not qualify for exemption. It is not the same as the routine work that prepares your annual accounts.
The auditor must be a registered, independent auditor. They review your records, test a sample of transactions and balances, and give a formal opinion on whether the accounts show a "true and fair view" of the company's position. Preparing the accounts and auditing them are two distinct jobs, and most dental companies only ever need the first.
The test that decides it: are you a small company?
This is the part the older guidance often gets backwards. The starting point in law is that a company needs an audit. The question is whether it escapes that requirement by qualifying as a small company and not sitting in an ineligible group. So the correct logic is not "you need an audit if you exceed the limits". It is "you are exempt from audit if you stay within the limits and are not otherwise barred".
A company qualifies as small for a financial year if it meets at least two of these three size limits:
- Annual turnover: not more than £15 million
- Balance sheet total: not more than £7.5 million
- Average number of employees: not more than 50
Meeting any two of the three is enough. A practice could, in principle, have a large balance sheet and still be small if its turnover and headcount are within limits. For most dental companies the point is academic, because turnover, assets and staff numbers all sit comfortably below the limits at the same time.
The thresholds were uplifted from 6 April 2025
The size limits were raised significantly for financial years beginning on or after 6 April 2025. If you are working from an older article or a memory of the previous figures, those numbers are now out of date. The table below shows the change.
| Small-company criterion | Old limit (FYs before 6 Apr 2025) | New limit (FYs from 6 Apr 2025) |
|---|---|---|
| Annual turnover (not more than) | £10.2 million | £15 million |
| Balance sheet total (not more than) | £5.1 million | £7.5 million |
| Average employees (not more than) | 50 | 50 |
| Test | Meet 2 of 3 | Meet 2 of 3 |
The employee limit was left unchanged at 50. The two financial limits rose by roughly half, which pulls even more companies inside the small-company definition. The figures apply to the financial year in question, so a company straddling the change date uses the old limits for a year that began before 6 April 2025 and the new limits for one beginning on or after that date.
Where a typical dental practice sits
A busy mixed single-site practice might turn over somewhere between £1 million and £2 million. That is a small fraction of the £15 million turnover limit. Its balance sheet, even with surgery fit-out, equipment and goodwill, is very unlikely to approach £7.5 million, and almost no single practice employs anywhere near 50 people on average. On any reasonable reading, a standalone dental company comfortably qualifies as small and is therefore audit-exempt.
The narrow cases where a dental company does need an audit
Exemption is the norm, but it is not universal. A statutory audit becomes mandatory in these situations.
The company is too big to be small
A company that fails the size test, by exceeding two of the three limits, loses the exemption. In dentistry this realistically only happens with larger corporate groups. A group running eight or ten practices can move past the £15 million turnover limit and, with property and goodwill across several sites, past the £7.5 million balance sheet limit too. At that scale, an audit is part of the territory.
The company is in an ineligible group or a barred category
Some companies cannot use the audit exemption regardless of size. The exemption is not available to public companies (other than dormant ones), to certain regulated entities such as banks, insurers, e-money issuers and investment firms, or to companies whose shares trade on a regulated market. A company that is part of a group can also lose the standalone exemption depending on the group's overall size and any ineligible member. These categories rarely touch an ordinary dental practice, but a dentist who owns a practice inside a wider corporate or investment structure should have an accountant confirm the group position rather than assume the standalone test applies.
Shareholders require an audit
Even a company that qualifies for exemption can be required to have an audit by its own members. Shareholders holding at least 10 percent of the shares, by number or by nominal value, can demand one for a financial year. The request must be in writing and must reach the registered office at least one month before the end of that year. In a dental company with two or more shareholding principals, one partner wanting independent assurance over the figures can trigger this. It is a member right, not a size question.
Structure matters: company versus partnership
The audit rules above are Companies Act rules, so they apply to incorporated practices. Your structure changes whether they bite at all.
Limited companies
An incorporated dental practice is within the Companies Act regime and must apply the small-company test each year. In practice that means confirming it still qualifies as small, which it almost always does. Many dentists incorporate for the reasons set out in our guide to corporation tax for dental limited companies, and audit exemption is one of the genuine simplicity benefits that comes with staying within the small-company limits.
Traditional partnerships
An ordinary dental partnership is not a company, so the Companies Act audit requirement does not apply to it at all. Partners are personally liable and there is no statutory audit of partnership accounts. A partnership might still choose an external review for its own reasons, such as a lender condition or a term in the partnership agreement, but nothing in company law forces it.
Audit is not the same as these other obligations
It is easy to confuse a statutory audit with other checks a dental practice goes through. They are separate, and none of them is the audit discussed here.
- CQC registration is a clinical and operational regulatory requirement from the Care Quality Commission. It is not a financial audit.
- NHS year-end reconciliation settles your actual UDA delivery against your contract target. It is a contractual settlement with the commissioner, not a statutory audit of your accounts.
- An accountant's report of the kind some other regulated professions must file, such as solicitors under their client-money rules, has no equivalent for dentists. There is no profession-specific accounts report imposed on dental practices.
When audited or examined accounts get requested anyway
Quite apart from the statutory position, a third party can ask for a higher level of assurance over your accounts as a matter of contract. This is a commercial request, not a legal duty, and you can usually negotiate it.
Lenders and landlords
A bank funding a practice acquisition, or a landlord granting a substantial lease, may write a requirement for audited or independently examined accounts into the agreement. This tends to appear with larger facilities. Read any loan or lease before you sign and check whether the requirement is triggered by a borrowing level or asset value, because it commits you to a recurring cost the statute itself does not impose.
Independent examination as a middle ground
Where a lender or fellow shareholder wants some external comfort but a full audit is more than the situation needs, an independent examination is a lighter-touch review. It gives limited assurance rather than the full opinion of an audit and is less intrusive. It can satisfy a contractual request for oversight without committing you to a statutory-grade audit you are not legally required to have.
Practical points for a growing practice
If your practice is expanding towards group scale, keep an eye on the size test rather than waiting for a surprise at year-end. The discipline is the same one that drives good practice management generally: know your numbers as you go.
Track the three measures. Monitor turnover, balance sheet total and average headcount through the year so you can see the small-company limits approaching before you cross them. Our guide to management accounts and the metrics to track covers how to keep these figures in front of you.
Remember the two-year rhythm. Qualifying as small generally depends on meeting the limits in the current and preceding year, so a single spike does not instantly remove exemption, and a single dip does not instantly restore it. An established company looks at both years.
Plan for the first audited year. If you can see the company genuinely outgrowing the small-company limits, prepare records and choose an auditor with dental sector experience before the year you need them, rather than scrambling after the year-end. An auditor who understands NHS contract income and private treatment plans will run a smoother first audit.
Getting it right for your practice
For almost every standalone dental practice the answer is straightforward: you qualify as a small company, you are exempt from a statutory audit, and you simply prepare and file accounts. The cases that change the answer are real but narrow: outgrowing the size limits as a group, sitting in an ineligible or regulated structure, or a 10 percent shareholder exercising their right.
If you are unsure where your company sits, particularly inside a group or an investment structure, a specialist dental accountant can confirm your position against the current size limits and the ineligibility rules, and can advise on independent examination where a lender or co-owner wants assurance without a full audit. That keeps you compliant without paying for an audit the law does not require.