The Autumn Budget landed with a quieter bang than some anticipated, with many businesses expecting the new government to introduce aggressive changes and sterling shocks. Whilst changes were made, many weren’t too dramatic. As the financial world adjusts following the October announcement, dental practice owners need to be financially prepared for the coming changes, big and small.
One notable change to be better informed about is the increase in Capital Gains Tax (CGT). This affects the income from a sale. There has been some outcry: farmers, such as those who have sold land for public transport connections, will now receive less after the change to CGT.[i] For dental practice owners about to sell or looking to sell in the next few years, it is essential to be familiar with the new rules to maximise the profits from a sale.
CGT change explained
CGT is a tax placed on the profits of a sale for something that has increased in value since being originally bought.[ii] The gain is what is taxed, rather than the full amount of money received. For instance, if you bought a practice for £500,000 and sold it years later for £2 million, the £1,500,000 increase is what is taxed. The change affects individuals, trustees and personal representatives who pay Capital Gains Tax.
Whilst the increase in CGT looks modest at 4%, it can make a big impact in net sale proceeds. For higher or additional rate taxpayers – those over the £50,270 threshold – the CGT change has been enacted from 30 October 2024. This means individuals after allowances and reliefs individuals will pay:
- 24% on gains from residential property
- 28% on gains from carried interest
- 24% on gains from other chargeable assets[iii]
The previous rate was 20% on gains made from other chargeable assets e.g. dental practices up to 29 October 2024.
In contrast, for basic rate taxpayers in the £12,751 to £50,270 income bracket, the rate paid depends on the size of the gain, the income and whether the gain is from assets or residential property. Trustees and personal representatives have different rates too, with both paying 24% on chargeable assets, up from the previous 20%.
Those affected by CGT for the 2024-2025 tax year must identify any gains made before and after 30 October so that the correct rate of pay can be determined when filing a tax return. For contracts entered into before 30 October 2024 but completed after that date, there are special provisions for the main rate changes. For contracts eligible for relief, the Business Asset Disposal Relief (BADR) rates change on 6 April to 14% whilst Investors’ Relief allowances dropped to £1 million from £10 million on 30 October.
Effects of the change
For those looking to sell their dental practice, the 4% increase in CGT might be a concern. The difference between 20% and 24% means that, for example, an extra £40,000 will be paid on top of the previous amount for every £1 million of value for the dental practice. This cuts into the profits from selling.
A necessary evil?
The changing tax rate is estimated to impact 264,000 individuals in the 2025-2026 tax year, with 45–74-year-olds comprising 65% of this demographic.[iv] The government hopes that this package of changes will raise revenue while maintaining the internationally competitive UK tax system. The rise in CGT is expected to generate vast amounts to the Exchequer; for the 2025-2026 tax year, the rise is set to add £1.44 billion, a considerable increase.iv
Here to help
With the new government and shifting financial measures, it is essential that practice owners looking to sell are supported by a team of experts. Dental Elite has been completing practice health checks since its inception, offering free valuation reports that include an in-depth analysis on how to enhance dental practice value. By providing commentary on potential areas for improvement and assisting in generating reliable marketing ideas and techniques, selling a practice is easy with Dental Elite.
Selling a dental practice is a complex prospect, with many factors to consider. The changes in CGT were inevitable and can be costly, but with the right support dental practice owners can push their practice to reach its highest potential for a superior profit margin.
For more information on Dental Elite visit www.dentalelite.co.uk, email info@dentalelite.co.uk or call 01788
Author Bio
Luke Moore is one of the Founders and Directors of Dental Elite and has overseen well in excess of 750 practice sales and valuations. With over 19 years working in the dental industry, Luke has extensive knowledge in both dental practice transfers and recruitment and understands the complexities of NHS and Private practices.
[i] Gutteridge, N. (2024). Farmers forced to sell land for roads and HS2 to receive less after capital gains tax raid. [online] The Telegraph. Available at: https://www.telegraph.co.uk/news/2024/11/11/capital-gains-tax-budget-farmers-reeves-hs2/.
[ii] GOV.UK (2012). Capital Gains Tax. [online] GOV.UK. Available at: https://www.gov.uk/capital-gains-tax.
[iii] Gov.UK (2022). Capital Gains Tax. [online] GOV.UK. Available at: https://www.gov.uk/capital-gains-tax/rates.
[iv] HM Revenue & Customs (2024). Capital Gains Tax — rates of tax. [online] GOV.UK. Available at: https://www.gov.uk/government/publications/changes-to-the-rates-of-capital-gains-tax/1cf25453-5b0c-4e7b-9165-65cf117e0af0.
