When you sell your dental practice, the profit you make is normally charged to capital gains tax rather than income tax. For most practice owners this is the single largest tax event of their working life, so it pays to understand how the gain is calculated, where the reliefs apply, and how the rates have changed.
This guide is the broad overview of capital gains tax when selling a dental practice. It walks through how the gain is worked out, the annual exempt amount, where Business Asset Disposal Relief sits, the main rates on anything above the relief, the difference between an asset sale and a share sale, and how the gain is reported. For the deeper mechanics, we link out to focused guides at each step.
How the Capital Gain Is Calculated
Capital gains tax is charged on the gain, not on the total sale price. The gain is broadly the disposal proceeds less the allowable costs:
- Base cost - what you originally paid to acquire the practice, or the cost of building it up if you started from scratch.
- Incidental costs of acquisition and sale - solicitors' fees, accountants' fees, agents' fees and valuation costs directly connected with buying and selling.
- Enhancement expenditure - capital spending that is still reflected in the asset at the point of sale, such as a significant fit-out or extension. Note that routine running costs and items already relieved elsewhere are not allowable here.
For an anonymised example, suppose a principal acquired a practice for goodwill and fixtures of £400,000, spent £40,000 of qualifying enhancement over the years, paid £20,000 in legal and professional fees on the way in and out, and sold for £760,000. The chargeable gain before reliefs is £760,000 less £460,000, which is £300,000.
The Annual Exempt Amount
Every individual has a capital gains tax annual exempt amount that is deducted from total gains before any tax is charged. For 2024/25 and 2025/26 this is £3,000 (it was cut from £6,000 and, earlier, from £12,300). The exemption is per person and cannot be carried forward, so a gain falling into a single tax year only benefits from one year's exemption.
Where a practice is genuinely owned jointly, for example by spouses who are both partners, each owner has their own annual exempt amount and their own £1m BADR lifetime limit, which can change the overall position materially. The split has to reflect the real ownership, not just a tax wish.
Where Business Asset Disposal Relief Fits
Business Asset Disposal Relief (BADR), formerly Entrepreneurs' Relief, applies a reduced rate of CGT to qualifying business disposals, up to a lifetime limit of £1m of gains per individual. It is the relief most dental practice sellers care about, and its rate has changed, so the old "10%" figure is now wrong for current disposals.
The BADR rate depends entirely on the date of disposal:
| Date of disposal | BADR rate |
|---|---|
| On or before 5 April 2025 | 10% |
| 6 April 2025 to 5 April 2026 | 14% |
| From 6 April 2026 onwards | 18% |
The £1m lifetime limit is unchanged. In broad terms, BADR requires that you have met the qualifying conditions for at least two years before the disposal. For a sole trader or partner selling the business or a share of it, that means owning and trading the business. For a share sale in an incorporated practice, it means holding at least 5% of the ordinary share capital, 5% of the voting rights and 5% of the economic interest, and being an officer or employee of a trading company. The statutory framework is at TCGA 1992 ss.169H to 169S.
We keep the detailed eligibility tests in separate guides so this overview stays readable. For who and what qualifies, see Business Asset Disposal Relief for dentists: what qualifies, and for a focused look at the relief in the current environment see our guide to BADR on a dental practice sale in 2026.
Main CGT Rates on Gains Above the Relief
If your gain exceeds the £1m BADR lifetime limit, or part of the disposal does not qualify for BADR, the excess is charged at the main CGT rates. These were unified by Finance Act 2024 with effect from 30 October 2024. For gains other than residential property and carried interest, the rates are:
- 18% to the extent the gain falls within your remaining basic-rate income tax band.
- 24% on the part of the gain above the basic-rate band.
These figures replace the older 10%/20% pairing that applied before 30 October 2024, so any computation still using 10%/20% for a current disposal will understate the liability. Because the rate that applies to part of the gain depends on your other income for the year, the order and timing of disposals can affect how much sits in the basic-rate band.
Asset Sale Versus Share Sale
How the practice is structured changes who is taxed and which relief is available. The two broad routes are an asset sale and a share sale.
| Feature | Asset sale | Share sale |
|---|---|---|
| What is sold | The underlying assets (goodwill, equipment, stock) | The shares in the company that owns the practice |
| Who realises the gain | The seller (sole trader/partner) or the company, depending on structure | The individual shareholder |
| BADR available to the individual | Yes for an unincorporated business; no on a company-level asset sale | Yes if the 2-year share conditions are met |
| Tax layers | For a company asset sale: corporation tax on the company gain, then extraction to the shareholder | Single CGT charge on the shareholder |
The key point for incorporated practices is that an asset sale by the company does not give the shareholder BADR. The company pays corporation tax on its gain, and the proceeds then have to be extracted, which is a second tax point. The usual route to personal BADR on an incorporated practice is a share sale. For a fuller comparison, see asset sale versus share sale for a dental practice.
Goodwill and Intangible Assets
Dental practice goodwill is often the largest single component of the price. It covers patient lists, reputation, location value and established referral relationships. For an unincorporated seller, the goodwill gain is a chargeable gain that can qualify for BADR where the conditions are met.
The practical challenge is apportioning the total price between goodwill, equipment, fixtures and any stock, because the split affects the gain computation and the buyer's position. A defensible valuation, agreed in the sale documentation, is important. This sits alongside the wider financial due diligence a buyer will run.
Reporting and Paying the CGT
A goodwill or practice-sale gain is reported through Self Assessment for the tax year in which the disposal falls. The tax is due by 31 January following the end of that tax year. So a disposal in the 2025/26 tax year is reported on the 2025/26 return, with CGT payable by 31 January 2027.
One common misconception is worth correcting. The 60-day CGT return (the in-year reporting and payment window) applies to UK residential property only. It does not apply to the goodwill or business element of a practice sale, so a practice seller does not file a 60-day return for the practice gain. If, separately, you also dispose of a UK residential property as part of your wider plans, that property disposal is reportable on its own 60-day return.
Timing and the Disposal Date
Because the BADR rate steps up on 6 April 2026, the disposal date can have a real effect on the tax. For CGT the disposal date is fixed by the contract, not by completion:
- Unconditional contract - the disposal date is the date of exchange (TCGA 1992 s.28(1)).
- Conditional contract - the disposal date is when the last condition is satisfied (TCGA 1992 s.28(2)).
This matters because a sale that exchanges unconditionally before 6 April 2026 falls in the 14% BADR band, while exchange on or after that date falls in the 18% band. The lever has to be balanced against commercial reality, the buyer's funding and any conditions in the contract, but it is genuine. We cover this specific decision in selling before the 6 April 2026 BADR rate rise.
Deferred Consideration and Earn-Outs
Many practice sales involve some consideration paid after completion, whether as fixed deferred instalments or a variable earn-out tied to future performance. The CGT treatment differs depending on whether the future amount is ascertainable at the date of disposal, and an unascertainable earn-out is itself treated as an asset with its own later disposal. This affects when the gain crystallises and which BADR rate applies to which slice.
The mechanics are detailed, so we keep them in a dedicated guide. See earn-outs and deferred consideration on a dental practice sale before agreeing any deferred structure.
Deferring the Gain Through Incorporation
If you are not selling externally but moving an unincorporated practice into a limited company, the gain on transferring the business can be deferred rather than triggered. Incorporation relief under TCGA 1992 s.162 defers the gain on transferring the whole business to a company in exchange for shares, by reducing the base cost of those shares. This is a different decision from an outright sale, and it interacts with later BADR planning. See section 162 incorporation relief for a dental practice.
Practical Steps for Sellers
A few habits make the computation cleaner and the relief easier to secure:
- Keep base-cost records - retain evidence of the original acquisition cost, qualifying enhancement spending and the professional fees on acquisition and sale.
- Document the apportionment - agree and record the split of the price between goodwill, equipment and stock.
- Evidence the BADR conditions - keep proof of your ownership percentage and your trading or officer/employee role across the two-year window.
- Plan the date deliberately - given the BADR rate bands, decide consciously which side of 6 April 2026 a disposal should fall, in line with the contract type.
- Coordinate with extraction planning - tie the sale into your wider retirement and profit extraction picture, since what is best for CGT alone may not be best overall.
Getting Advice Early
Practice sales involve large sums, and small differences in structure, valuation split or timing can change the CGT materially. A specialist dental accountant can model the asset-versus-share question, confirm BADR eligibility, and make sure the sale documentation supports the tax position. The most useful planning happens before heads of terms are agreed, when there are still options on structure and timing rather than after the deal is fixed.