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Selling your dental practice: goodwill, CGT and Business Asset Disposal Relief guide
What to expect on Capital Gains Tax when you sell a dental practice, how Business Asset Disposal Relief applies, and what the timing of exchange vs completion means for your bill.
Tax year: 2026/27. Last reviewed: July 2025.
Practice sale model (Excel)What you are selling
When a dental principal sells a practice, the consideration is broadly split between tangible assets (equipment, fit-out) and goodwill (the value attached to the patient list, reputation and trading name). Tangible assets may be bought and sold without an immediate capital gain if they are at or near book value, but goodwill is almost always a capital gain.
For most principals, goodwill will be the largest single component of the sale proceeds and therefore the main driver of the Capital Gains Tax liability.
Capital Gains Tax: the basics
Capital Gains Tax applies to the gain, not the gross proceeds. The gain is broadly proceeds minus the cost base of the asset. For goodwill in a long-established practice, the cost base is often very low (the goodwill was never paid for, so it has a nil cost), making the taxable gain almost equal to the proceeds allocated to goodwill.
The Annual Exempt Amount (AEA) reduces the gain before tax is computed. For 2025/26 and 2026/27, the AEA is £3,000.
The rates that apply depend on whether Business Asset Disposal Relief (BADR) is available and on whether any of the gain falls within the basic-rate income tax band.
Business Asset Disposal Relief
BADR reduces the effective CGT rate on qualifying gains to a lower rate within a lifetime limit of £1,000,000. The qualifying conditions broadly require that for at least two years before the disposal you have owned and used the business asset, and the business has been a trading business (not an investment activity).
The BADR rate from 6 April 2026 is 18%, confirmed at primary source (gov.uk/business-asset-disposal-relief). Disposals before that date attracted a rate of 14%.
Gains above the £1m lifetime limit are taxed at the standard CGT rates: 18% within any remaining basic-rate band, and 24% above that, both applying from 30 October 2024.
Why timing matters around April 2026
For sales that span 5 April and 6 April 2026, the date of disposal determines the rate. The disposal date for CGT purposes is the date of unconditional exchange of contracts, not completion.
An unconditional exchange on or before 5 April 2026 fixes the 14% BADR rate for the whole gain qualifying for BADR, even if completion follows after that date.
A contract conditional on a future event, such as NHS contract novation, is treated as disposing on the date the condition is met. This is a common situation in dental practice sales, and it means the conditional contract does not lock in the pre-April 2026 rate.
For sales that have not yet exchanged, this timing issue is a live planning point. Speak to a specialist before exchange if there is any chance the sale might straddle that date.
Worked illustration: £200,000 gain
Assume a gain of £200,000, other income of £50,000, BADR eligible, AEA available at £3,000.
- Taxable gain: £200,000 less £3,000 AEA equals £197,000.
- The gain is within the £1m BADR lifetime limit, so the full £197,000 is taxed at 18% (from 6 April 2026).
- CGT: £197,000 times 18% equals £35,460.
- Net proceeds after CGT: £200,000 less £35,460 equals £164,540.
Without BADR, using standard CGT rates and other income of £50,000 (which uses most of the basic-rate band), nearly all the gain would fall at 24%, producing a significantly higher bill.
Share sale vs asset sale
Where the practice is held in a limited company, the sale can be structured as a sale of shares or of business assets. The CGT and BADR implications differ.
- Share sale: the individual seller disposes of shares. BADR can apply to the gain on the shares if the qualifying conditions are met (broadly, 5% shareholding and two-year holding in a personal company). Gains are taxed on the individual.
- Asset sale: the company disposes of the business assets. Any gain is a company gain subject to corporation tax, and the proceeds must then be extracted from the company in a tax-efficient way. This typically means a Members' Voluntary Liquidation to access the cash at CGT rather than income tax rates.
A specialist should model both routes before the sale is agreed, because the structuring decision locks in the tax treatment at exchange.
Earn-outs
Where part of the consideration is an earn-out (deferred consideration dependent on future performance), the CGT position is more complex. The earn-out element is typically treated as a separate disposal that occurs when it crystallises, not at exchange. The rate that applies is the rate in force at the date of the later disposal.
Reinvestment reliefs
Business Asset Rollover Relief allows you to defer a gain by reinvesting the proceeds into another qualifying business asset within certain time limits. If you plan to acquire another practice after the sale, this may be worth considering. The gain is deferred rather than extinguished: it becomes payable when the replacement asset is disposed of.
Next steps
The Excel model that came with this guide applies the CGT calculation to your own estimated gain and income. Use it to understand the approximate tax bill, then take specialist advice before exchange of contracts to confirm the exact position and consider any timing or structuring options.
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