Vanessa Pople, member of the National Association of Dental Accountants and Lawyers and partner at Azets tells you what you need to know about the changes introduced in last month's budget
Although dentistry was not specifically targeted by Chancellor John Healey, several announcements affecting tax on profits, investment in equipment, VAT, employment costs and practice sales will have an impact on all involved in the sector. The general outlook for dentistry is mixed and overall emphasises the absolute requirement for careful and considered tax, succession and retirement planning.
The build up to this Budget saw little in the way of ‘leaks’ in advance of the speech, often viewed as a means to build tolerance for or to gauge reaction to potentially unpopular changes. Possibly the most surprising to some was the confirmation that the rate of CGT would not be aligned with income tax.
Business investment
Several measures keep entrepreneurship, investment in business, support for innovation and efficiency at the forefront of policy and are seen as crucial to achieve economic success. For the majority of dental businesses, the existing £1M 100% allowance for capital expenditure has been sufficient to maximise tax relief on capital expenditure.
For larger practices and groups, the continuation of full expensing for qualifying capital expenditure will be welcome, as will the increase in the main first year allowance from 40% to 50% from 1 April 2027.
These positive measures are countered by a reduction in the main writing-down allowance from 14% to 12% from April 2027.
Entrepreneur or founder?
With the halving of the lifetime allowance for Business Asset Disposal Relief (BADR) from £1M to £500K from 6 April 2027, you could be forgiven for thinking that the Government is turning its back on business owners in the UK. Consider then the new ‘Founder’s Relief’, offering a 10% tax rate on capital gains of up to £10M from April 2027, provided certain conditions are met.
For many, a successful dental practice represents the owner's largest personal asset, their pension fund in some cases, and a measure that reintroduced the coveted 10% CGT rate would be very attractive. Practice owners considering retirement or private equity investment will be interested in the detail behind this proposal. Sadly, whilst we don’t have the full details yet, we do know the incentive is aimed at 'eligible founders and early investors of high-growth, innovative companies'. A consultation paper has been launched on the operation of the relief in advance of coming into effect next April. From this, the proposed conditions are summarised as such:
Founder: Minimum 25% ordinary share capital; Ownership period of minimum five years; UK resident
Company: Must be in scope for UK Corporation Tax and be a qualifying trading company or holding company of trading group and £10M turnover in the accounting period prior to sale.
There are three tests, two of which must be met.
- Turnover: Compound growth in turnover of 25% across 3 consecutive years within 10 years prior to sale.
- Headcount: Compound growth in full-time employees of 25% across 3 consecutive years within 10 years prior to sale, with at least 15 in the last accounting period before sale.
- Innovation: Qualifying expenditure of £1.5M or more of qualifying R&D and have made a claim for R&D tax relief in the 3 years prior to sale.
Unless there are significant changes to the draft proposal, it is unlikely that many dental practice owners will benefit from this relief.
VAT changes and administrative burden
Having recently discussed the VAT registration pitfalls (CPD available)s for practices unaware of the reverse charge regime and its implications on the purchase of services, materials and marketing from outside of the UK, we now have a change affecting the administrative burden of collecting VAT.
From April 2027, the overseas supplier will be required to charge and pay over VAT on supplies to non-VAT registered UK businesses. With the vast majority of dental businesses currently not registered for VAT, there will now be an immediate cost to the practice of VAT added to these overseas supplies, that on the whole, will be unlikely to be recovered.
This measure is intended to eliminate/reduce tax loss through unregistered businesses receiving overseas services and does not mean dental practice owners do not have a responsibility to be aware of their potentially VATable supplies. Whilst billed as a levelling of the playing field, the reality for dental business is this is likely to represent an absolute cost, with little scope for recovery when/if VAT registered.
Employment and workforce considerations
National Living Wage and National Minimum Wage increases of 3.9% in April 2027 will place added pressure on practice owners once again.
Recruitment continues to be a challenge across much of the dental sector. Consequently, many practices may find themselves increasing salaries simply to remain competitive and to retain good staff. Those operating NHS contracts, and which represent the majority of their income, could find this particularly challenging as revenue growth fails to keep pace.
MTD and timely payments
Those hoping to see a scrapping of the extension to MTD (maxing tax digital) reporting requirements this coming April will be disappointed. However, taxpayers falling into scope (turnover over £30K) will not receive penalty points for late submission of quarterly updates during the 2027/28 tax year.
This will ease the pressure on self-employed associates, hygienists, therapists and sole-trader practice owners. One of the objectives around digital reporting is the requirement for digital accounts, leading to improved record-keeping and tax administration; many dental professionals are likely to need to invest in software and/or compliance support.
Earlier this year saw a consultation on HMRC’s proposed ‘Timely payments’ policy, whose objective is to have tax paid closer to the point income is earned or received. Currently, for a self employed dentist/hygienist/therapist, tax on profits earned in the year to 31 March 2027 will be payable; 31 January 2027, 31 July 2027 and the balance on 31 January 2028. Timely payments will move away from the current system in favour of more regular, in-year payments.
Having reviewed the consultation responses, the government published an update on budget day essentially drawing the conclusion 'the underlying principle of making smaller tax payments, closer to the point of taxable activity, has merit...'. The changes will be rolled out in April 2029, with more detail to come next year. Taxpayers in receipt of payrolled income will have the option of having tax due on untaxed income collected through their salary or automated collection, e.g. direct debit.
With many in the sector self employed or in receipt of other untaxed income (interest and rent) the cashflow implications could be significant.
The investor
A mixed bag of announcement seeing a hike of 4% in the tax on rental profits and interest across all tax bands:
2027/28 2026/27
Basic rate 24% 20%
Higher Rate 44% 40%
Additional Rate 49% 45%
The U-turn announced on the tax-free cash ISA will be welcome - scrapping the previously planned reduction to £12,000 in April 2027, and keeping the current £20,000 limit.
In summary
From a dental-sector perspective, the Autumn Budget 2026 brings little positive change, but did we really expect that it would?
The majority of measures will bring a financial and administrative burden, continuing the upward pressure on costs, tax compliance obligations with a lack of any dentistry-specific support.
For most dental practice owners, the practical priorities following the Budget should be:
- Reviewing capital expenditure plans to maximise relief.
- Assessing succession and retirement strategies following the reduction in the lifetime limit for BADR and the introduction of pension funds into the IHT taxable estate from April 2027.
- Preparing for the ‘timely payments’ regime - to come into effect in April 2029.
- Reforecasting payroll costs and patient pricing structures for 2027.
- Reviewing accounting systems to accommodate evolving VAT and digital reporting requirements.
Careful financial planning remains essential for dental professionals seeking to protect profitability and invest in future growth.