The CGT bill on a dental practice sale is not fixed. How much you pay depends on decisions made 12 to 24 months before completion — not in the week you accept an offer. This guide covers the main tax planning levers available to dental practice owners in the pre-sale window: structuring your disposal to qualify for Business Asset Disposal Relief, using pension contributions to reduce your income tax position before you exit, managing the CGT position on the practice premises, and understanding how the timing of your completion date affects your liability. It is written for practice owners who are 12 to 24 months from a target exit.
Business Asset Disposal Relief: Foundation and Risk Points
Business Asset Disposal Relief (BADR) reduces the CGT rate on qualifying disposals to 18% from April 2026, against a standard rate of 24% for higher rate taxpayers. On a £1 million gain, the difference is £60,000. BADR is worth protecting.
The Qualifying Conditions
For a share sale, BADR requires that throughout the two-year period immediately before completion you have been:
- An officer or employee of the company (working director, not a nominee)
- Holding at least 5% of the ordinary share capital
- Holding at least 5% of the voting rights
- Entitled to at least 5% of distributable profits
- Entitled to at least 5% of assets on a winding-up
All five conditions must be satisfied continuously for the full two years. They must have been continuously met throughout the window — not just at the point of sale.
The Incorporation Timing Risk
If you incorporated your dental practice less than two years before your planned sale date, you face a specific problem: you cannot satisfy the two-year working director/officer condition on a share sale. A practice owner who incorporated in January 2025 and is targeting a June 2026 completion will not meet the two-year condition. Options include delaying completion until the two-year mark is met, or structuring the sale as an asset disposal — which carries the double-tax risk if selling from a company. Take advice before accepting any offer.
What to Audit Now
- Confirm you hold at least 5% of each of: ordinary shares, voting rights, dividend entitlement, and winding-up entitlement
- Check whether any recent share restructuring, equity grant to associates, or family trust arrangement has diluted your economic interest below 5%
- Confirm you have been a working director for the past two years and are on payroll — not simply a named director with no salary
Pension Contributions in the Pre-Sale Window
A pension contribution in the year before your sale completes is one of the most effective tax planning tools available to dental practice owners. Contributions reduce your adjusted income, which directly reduces your income tax liability — and for dental principal income levels, this is usually at 45%.
The Annual Allowance and Carry-Forward
The standard pension annual allowance is £60,000 (2024–25 and 2025–26). You can carry forward unused allowance from the three preceding tax years if you were a member of a pension scheme in those years. In practice, this means a practice owner who has not maximised pension funding can make contributions of up to £180,000 in a single tax year before their sale completes, subject to having sufficient earnings to support the relief.
The relief is available on contributions to a SIPP (Self-Invested Personal Pension), a stakeholder pension, or company pension contributions paid by your practice company. Company contributions count against the company’s corporation tax bill and reduce your annual allowance, but are not limited to your personal earnings in the same way as personal contributions.
NHS Pension Interaction
If you are an active member of the NHS Pension Scheme, your NHS pension accrual counts towards your annual allowance. For high-earning dentists, this can significantly reduce — or eliminate — the available carry-forward allowance. NHS Pension Scheme accrual is calculated using the pension input amount methodology (20× the increase in accrued pension, plus 1× any lump sum increase). If your NHS pension input amount for recent years has been substantial, the effective carry-forward may be materially lower than the headline £180,000 figure.
Before making any large pension contribution, calculate your exact annual allowance position — including NHS pension inputs — to avoid an annual allowance tax charge that would cancel the benefit.
The Practice Property: A Separate CGT Position
If the practice premises are owned personally by the principal, the property disposal creates a separate CGT computation that does not automatically follow the same treatment as the goodwill.
BADR on the Property
BADR can extend to gains on commercial property used exclusively in the business, but only when the property is disposed of at the same time as the associated business and the business qualifies. A property let commercially by the owner to their own practice company — at arms-length rent — does not straightforwardly qualify as a business asset for BADR purposes. HMRC’s position is that the landlord and the trading company are separate, and the landlord’s asset is an investment asset rather than a trading one.
This distinction can cost a practice owner 6 percentage points (18% BADR rate vs 24% standard rate) on the property gain. On a property with a £500,000 gain, that is £30,000. The owner-occupier structure — where the principal owns and occupies directly rather than letting to a separate company — is more likely to qualify for BADR on the property.
Business Asset Rollover Relief
If you are reinvesting the property proceeds into another qualifying business asset, Business Asset Rollover Relief may allow you to defer the CGT on the sale until the replacement asset is itself disposed of. The replacement asset must be acquired within three years of the original disposal. Rollover relief is available on commercial property used in a trade and can be a useful tool for practice owners who are retiring but reinvesting proceeds elsewhere in a business context.
Timing the Disposal: Tax Year End and the Earn-Out Problem
Straddling the Tax Year End
The CGT liability from a disposal falls in the tax year in which completion occurs. The payment deadline is 31 January following the end of that tax year. A sale completing in March 2027 produces a CGT payment due 31 January 2028. A sale completing in May 2027 defers that same liability to 31 January 2029 — a further year of deferral on the same transaction. Where a deal is equally ready in February or April, the timing difference is worth raising with your adviser.
Earn-Outs and Marren v Ingles
Earn-outs create a specific cashflow problem. Under the principle in Marren v Ingles [1980], the right to receive future earn-out payments is itself valued and included in your CGT computation at completion — before you have received the cash. If an earn-out right is valued at £150,000 at completion, your CGT bill includes tax on that £150,000 (at 18% BADR rate: £27,000) payable by 31 January following completion, regardless of whether you have received the earn-out payment.
When earn-out payments are actually received, any excess over the original estimated value is a further gain — taxed at standard CGT rates (24%, not BADR rates) because by then you no longer meet the personal company test. Negotiate for a greater proportion of value to be received at completion, where BADR applies, rather than in deferred earn-out tranches where standard rates apply and the cash arrives later. Model the cashflow before accepting an earn-out structure.
Dividend vs Sale Consideration for Company Owners
For practice owners operating through a limited company, the choice between extracting pre-sale retained profits as dividends versus leaving them to be included in the sale consideration matters. Dividend income is taxed at 33.75% (higher rate) or 39.35% (additional rate) on amounts above the dividend allowance. Sale consideration qualifying for BADR is taxed at 18%.
In most cases, retaining profits in the company and selling the shares — which then include those retained profits, reflected in net asset value — is the more tax-efficient route. However, this depends on whether BADR is available, how the buyer prices the deal (some buyers price on EBITDA multiples rather than net assets, meaning retained cash does not translate directly into a higher price), and how much is retained relative to the £1 million BADR lifetime limit. Take specialist advice on your dividend policy in the 12 months before sale.
Getting a Pre-Sale Tax Review
The consistent thread through every item above is timing. BADR conditions take two years to build and can be broken in weeks. Pension carry-forward calculations require knowing your NHS pension input amounts for three prior years. Property CGT depends on how the ownership has been structured for the past decade. Earn-out negotiations are easier to structure tax-efficiently before heads of terms than after.
The minimum lead time for meaningful pre-sale tax planning is 12 months. For any structural changes — incorporation timing, share restructuring, pension catch-up, property ownership review — 18 to 24 months is more realistic. Instruct a specialist dental practice accountant or tax adviser before you begin discussions with buyers.
For guidance on the full sale process, see how to sell your dental practice. For guidance on identifying the right time to go to market, see when to sell your dental practice.
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Frequently Asked Questions
What is the BADR rate on selling a dental practice in 2026?
From 6 April 2026, Business Asset Disposal Relief applies at 18% on the first £1 million of qualifying gains on shares or business assets. The standard CGT rate for higher rate taxpayers is 24%. BADR requires you to have been an officer or employee holding at least 5% of shares and voting rights for the two years immediately before disposal.
Can I use pension contributions to reduce tax before selling my dental practice?
Yes. Pension contributions in the tax year before completion reduce your adjusted income and provide tax relief at your marginal rate. The annual allowance is £60,000, and carry-forward from the three preceding years can increase the available amount to up to £180,000. NHS Pension Scheme members must first calculate how much allowance has been used by NHS pension accrual, as this reduces available headroom. A large pension contribution made before your sale can be one of the most tax-efficient steps in your pre-sale plan.
Does BADR apply to the dental practice property?
BADR can apply to commercial property used exclusively in the business, provided it is disposed of at the same time as the associated qualifying business. However, a property owned personally and let to your own practice company at arm’s length is likely to be treated as an investment asset, and BADR may not apply. The owner-occupier structure is more likely to qualify. Take specialist advice before completion.
What is the tax problem with earn-outs when selling a dental practice?
Under Marren v Ingles, the right to receive future earn-out payments is valued and included in your CGT computation at completion — before the cash arrives. You pay CGT on the earn-out right in the completion year. BADR applies to that right at completion, but subsequent earn-out receipts above the original estimated value are taxed at standard CGT rates (24%) because you no longer meet the personal company test by the time they are received. Negotiate for a higher upfront payment and smaller earn-out element where possible.
Should I pay dividends before selling my dental practice or leave profits in?
In most cases, retaining profits in the company and selling the shares is more tax-efficient. Dividends are taxed at 33.75–39.35%; sale consideration qualifying for BADR is taxed at 18%. Whether this holds depends on BADR availability, how the buyer prices the deal, and how much is retained relative to the £1 million BADR lifetime limit. Take specialist advice on your dividend policy in the 12 months before sale.
How far in advance should I start pre-sale tax planning?
At least 12 months before your target exit, and ideally 18–24 months. BADR qualifying conditions require a continuous two-year window. Pension carry-forward requires scheme membership in the three prior years. Property ownership structures can take time to reorganise. Structural changes made after heads of terms are agreed are generally too late.