You've found the practice. The numbers look right, the patient list is healthy, and the lender is interested. Now the deal has to be structured, and that's where the tax either works for you or quietly costs you tens of thousands of pounds.
How you buy matters as much as what you pay. The split between goodwill, property and equipment, whether you buy shares or assets, and the company structure you sit it all in will shape your tax bill for years. Get it right at the start and you rarely revisit it. Get it wrong and it's expensive to unwind.
This guide is for associate dentists and existing principals buying their first or next practice in England, Wales or Northern Ireland. We'll walk through how goodwill is taxed for a buyer, the asset-versus-share decision, the funding and SDLT angles, and how the corporate structure ties it together.
What are you actually buying?
A dental practice purchase price is rarely one number. It's an allocation across three or four asset types, and that allocation drives the tax for both sides.
A typical practice sale splits roughly into:
| Component | What it is | Rough share of price |
|---|---|---|
| Goodwill and patient list | The right to future profits, the reputation, the patient base, the NHS contract relationship | 15% to 30% |
| Property | The freehold or a long lease on the premises | 60% to 80% (if freehold) |
| Equipment and fixtures | Chairs, imaging, fit-out, fittings | 5% to 10% |
Those proportions vary a lot. A leasehold practice with a strong private list might be mostly goodwill, while a freehold site swings the weighting heavily towards property. The point is that each slice is taxed differently, so the allocation in the contract isn't a formality. It's a tax decision, and the buyer and seller often want it pulled in opposite directions.
How is goodwill taxed when you buy a practice?
Goodwill is usually the part buyers least understand and the part that's changed most in recent years.
Here's the rule that catches people out. For most acquired goodwill, a company gets no corporation tax relief on writing it down. The deduction many buyers assume they'll get against profits simply isn't there for ordinary practice goodwill bought on its own.
There's a narrow exception. Where goodwill and other customer-related assets are bought as part of a business that also includes qualifying intellectual property (certain patents, registered designs, copyright and similar), relief is available at a fixed rate of 6.5% a year. That relief is given on the lower of the cost of the goodwill or six times the cost of the qualifying IP in the business you bought, per gov.uk's guidance on corporation tax relief on goodwill.
Most general dental practices don't carry meaningful qualifying IP, so in practice the relief often doesn't apply, or applies only to a small slice. You shouldn't assume the goodwill in your deal is tax-deductible. Model it as if it isn't, then let your accountant confirm whether any part qualifies.
Two more traps worth flagging:
- Related-party purchases are excluded. If you incorporate your own existing sole-trade or partnership practice into a company you control, you generally can't claim goodwill relief, because you're buying from a related party. That's a separate route with its own rules, not the third-party purchase we're covering here.
- Relief is claimed on the Company Tax Return. It isn't automatic. It has to be claimed, and supported.
The flip side: the seller's goodwill gain is a capital gain, often qualifying for Business Asset Disposal Relief, which is why sellers usually push for as much value into goodwill as the deal allows.
Asset purchase or share purchase: which is better?
If the practice you're buying is already inside a limited company, you face a choice that the seller will have strong views on.
Asset purchase. You (or your company) buy the trade and assets directly: the goodwill, the equipment, sometimes the property. You leave the seller's company behind, and crucially you leave its history, its liabilities and its skeletons behind too. You can cherry-pick what you take.
Share purchase. You buy the shares in the seller's company and step into everything it owns and owes. Contracts, employees and the NHS contract relationship usually carry over without reassignment, which can be smoother operationally. But you also inherit every past liability, including tax exposures you may not have spotted.
The tension is real and predictable:
| Factor | Asset purchase | Share purchase |
|---|---|---|
| Buyer's risk on hidden liabilities | Lower (you choose what you take) | Higher (you inherit everything) |
| Continuity of contracts and NHS relationship | May need consents and reassignment | Usually continues automatically |
| Typical buyer preference | Preferred | Cautious |
| Typical seller preference | Less favoured (potential double tax) | Preferred (capital gain, possible BADR) |
| Where the goodwill tax question lands | On you as buyer (relief usually limited) | Stays inside the company you bought |
There's no universal winner. Buyers generally prefer asset deals for the clean break and the control; sellers generally prefer share deals for the cleaner capital gains treatment. The right answer depends on the company's history, the NHS contract, and how the price is split. This is exactly the point at which sound tax advisory work pays for itself, before heads of terms are signed, not after.
What tax applies to the property and SDLT?
If the deal includes the freehold or a premium lease, Stamp Duty Land Tax (SDLT) usually applies to the property portion.
For non-residential and mixed-use freehold property in England and Northern Ireland, SDLT is charged in bands. Per gov.uk's SDLT guidance, the current freehold rates are:
| Portion of the price | SDLT rate |
|---|---|
| Up to £150,000 | 0% |
| £150,001 to £250,000 | 2% |
| Above £250,000 | 5% |
So on a £275,000 commercial premises, the SDLT is £2,000 on the slice from £150,001 to £250,000, plus £1,250 on the £25,000 above £250,000, giving £3,250 in total.
A few practical points. SDLT is a transaction cost, not a deductible trading expense, so factor it into your funding ask rather than your profit forecast. Wales has its own Land Transaction Tax with different bands, and Scotland its own Land and Buildings Transaction Tax, so the figures above don't apply there. And whether you hold the property personally or in the company is a separate decision with its own consequences for capital gains and for future borrowing.
How does funding affect the tax position?
Most practice purchases are funded with a commercial loan, and lenders are comfortable with the sector because demand is steady. Some lending models will even count goodwill alongside the property to support a high loan-to-value.
The tax angle is the interest, not the capital.
- Loan interest on borrowing taken out to fund a qualifying business purchase is generally a deductible expense against trading profits. The capital repayments are not.
- That makes the structure of the borrowing matter. Where the loan sits, and what it's documented as funding, affects whether the interest is relievable.
- Asset finance on equipment is a separate question, and equipment can attract capital allowances such as the Annual Investment Allowance of £1,000,000, which gives a 100% deduction on qualifying plant and machinery in the year of purchase. That's a genuine relief on the equipment slice even when the goodwill slice gives none.
The headline lesson: the parts of the price are not equal in the eyes of HMRC. Equipment can be highly tax-efficient, interest can be deductible, but goodwill usually isn't. Knowing that before you allocate the price is worth real money.
What's the most tax-efficient structure?
For most buyers, a limited company is the default vehicle, and it's usually the right one, but the reasons are about the long game, not the purchase itself.
A company pays corporation tax on its profits. For the financial years FY2025 and FY2026, that's 19% where profits are £50,000 or less, 25% where they're over £250,000, with marginal relief smoothing the rate in between, per gov.uk's corporation tax rates. Compare that to drawing the same profit personally, where higher-rate income tax sits at 40% above £50,270 of total income for 2025/26 (gov.uk income tax rates), and the case for retaining profit inside a company to service acquisition debt becomes clear.
The structure questions that actually move the needle:
- Trading company, property, and how they sit together. Holding the premises separately from the trade can protect the asset and ease a future sale, but it adds complexity and cost. There's no one-size answer.
- How you'll extract profit. Salary, dividends and pension all interact, and the right mix changes once acquisition debt is in the picture.
- The exit, planned from day one. A share sale later can qualify for capital gains treatment and Business Asset Disposal Relief. The structure you buy into shapes how clean and how taxed that exit is.
For larger or multi-site groups, this starts to look like genuine finance-director territory, which is where a fractional outsourced CFO service earns its keep: modelling the debt, the extraction and the exit as one connected plan rather than three separate problems.
Illustrative example: structuring a £600,000 buy
Illustrative example. Maya is an associate buying her first freehold practice for £600,000 through a new limited company. This is a simplified, generic scenario to show how the pieces interact, not a recommendation or a real client.
The contract allocates the price as:
| Component | Allocation |
|---|---|
| Property (freehold) | £400,000 |
| Goodwill and patient list | £160,000 |
| Equipment and fixtures | £40,000 |
| Total | £600,000 |
Working through the tax pieces:
- SDLT on the £400,000 property. Nil on the first £150,000, 2% on the next £100,000 (£2,000), and 5% on the remaining £150,000 (£7,500). Total SDLT: £9,500. This is a deal cost Maya needs in her funding, not a trading deduction.
- Goodwill of £160,000. The practice carries no qualifying IP, so no corporation tax relief is available on writing it down. Maya budgets as if the goodwill gives no tax deduction at all.
- Equipment of £40,000. Qualifying plant and machinery can be claimed under the Annual Investment Allowance, giving a 100% deduction of up to £1,000,000 in the year. So the full £40,000 reduces taxable profit. At the 19% small profits corporation tax rate, that's roughly £7,600 of corporation tax saved on the equipment slice.
- Funding interest. Interest on the acquisition loan is generally deductible against trading profits; the capital repayments are not.
The lesson Maya takes away: the three slices of the same £600,000 behave completely differently. The equipment is efficient, the interest helps, the SDLT is a sunk cost, and the goodwill, the largest non-property slice, gives nothing back in tax. That's exactly why the allocation and the structure are worth getting professional eyes on before signing.
All figures above use 2025/26 rates (and FY2025 for corporation tax). Always confirm the current position before you commit.
Get the structure right before you sign
The tax outcome of buying a dental practice is largely locked in at heads of terms, not at completion. Once the allocation and the asset-versus-share choice are agreed, your options narrow fast.
Want the deal structured to keep more of what you've worked for? Book a call with a Zmartly accountant who works with dentists buying practices, and we'll model the goodwill, funding and structure before you commit.
FAQs
Is goodwill tax-deductible when I buy a dental practice?
Usually not. For most acquired goodwill, a company gets no corporation tax relief on writing it down. Relief at 6.5% a year is only available where the goodwill is bought as part of a business that also includes qualifying intellectual property, capped at six times the cost of that IP. Most general practices have little or no qualifying IP, so you should budget as if the goodwill gives no deduction and let your accountant confirm whether any part qualifies.
Should I do an asset purchase or a share purchase?
It depends on the practice's history and the price split. Buyers usually prefer an asset purchase because they can choose what to take and leave hidden liabilities behind. Sellers usually prefer a share purchase because the gain is taxed as a capital gain, often with Business Asset Disposal Relief. There's no universal answer, so the decision should be modelled before heads of terms are signed.
How much SDLT will I pay on the practice premises?
For non-residential freehold property in England and Northern Ireland, SDLT is 0% up to £150,000, 2% on the portion from £150,001 to £250,000, and 5% above £250,000. On a £275,000 premises that's £3,250 in total. Wales and Scotland use their own separate property taxes with different bands.
Can I claim tax relief on the equipment I buy with the practice?
Often yes. Qualifying plant and machinery, such as chairs and imaging equipment, can be claimed under the Annual Investment Allowance, which gives a 100% deduction on qualifying spend up to £1,000,000 in the year of purchase. That makes the equipment slice of the price one of the more tax-efficient parts of a practice buy.
Is loan interest on a practice purchase tax-deductible?
Interest on borrowing taken out to fund a qualifying business purchase is generally deductible against trading profits. The capital repayments are not. Because relief depends on how the borrowing is structured and documented, it's worth setting this up correctly with your accountant at the outset.
Should I buy through a limited company?
For most buyers a limited company is the default and usually the right vehicle, mainly because of corporation tax rates, the ability to retain profit to service debt, and a cleaner future exit. Corporation tax is 19% on profits up to £50,000 and 25% above £250,000 for FY2025 and FY2026, with marginal relief between. Whether to hold the property inside or outside the company is a separate decision worth specific advice.
