Dental Practice – Tax
NHS vs private income: how the mix changes your practice tax
Two practices can post identical turnover and land on very different profit and tax bills – purely because of their NHS-to-private income mix. Here is the mechanism, and a full worked comparison of two practices to show exactly how it plays out.
Two dental practices can post identical turnover and end up with meaningfully different profit and tax bills, purely because of their NHS-to-private income mix. NHS UDA income is fixed-value, volume-driven work with relatively thin margins once associate pay and delivery costs are stripped out; private income – especially cosmetic and higher-value treatment – typically carries a wider margin. A practice that shifts even a modest share of turnover from NHS to well-run private work usually ends up with higher taxable profit, a higher tax bill, and meaningfully more cash left over after tax, all at the same top-line revenue.
At a glance
| Factor | NHS (UDA) income | Private income |
|---|---|---|
| How it’s priced | Fixed UDA value per treatment band, set by contract | Fee set by the practice, treatment by treatment |
| Typical margin | Thinner – driven by volume, associate share, and contract terms | Typically wider, especially on higher-value and cosmetic work |
| Predictability | Stable, contracted, but capped by annual UDA target | More variable, but scalable with demand and capacity |
| 2026 changes to watch | Contract reforms from April 2026 introduce mandatory unscheduled care quotas and new complex care pathway payments | Growth-driven, no equivalent regulatory ceiling |
How does NHS UDA income actually work?
A fixed value per treatment band, set per contract
NHS dental income in England is paid through Units of Dental Activity (UDAs) – a fixed number of units assigned to each treatment band, multiplied by a UDA value set individually in your practice’s contract, which can vary significantly practice to practice.
An examination is worth 1 UDA (Band 1). Fillings, root canals, and extractions are typically worth 3 UDAs (Band 2), with more complex cases falling into higher sub-bands. Crowns, bridges, and dentures are worth 12 UDAs (Band 3). There is no single national UDA value – it is negotiated per practice contract and commonly ranges from around £15 to over £40, averaging roughly £28-£30. Two practices delivering identical treatment can be paid meaningfully differently for it, purely based on historic contract value.
Private income and its growth
Priced by the practice, not fixed by contract
Private dental income – exams, hygiene, cosmetic treatment, implants, orthodontics – is priced by the practice rather than fixed by contract, which means it can grow with demand and capacity in a way NHS income structurally cannot.
Private income tends to fall into a few distinct categories worth tracking separately: routine private exams and treatment, hygiene and preventative care, and higher-value elective work – whitening, veneers, clear aligners, implants, and full smile makeovers – which typically carries the widest margins of anything a practice offers.
The cost of delivery: lab, materials, and associates
Same lab cost, very different fee – that’s the margin gap
NHS and private work carry meaningfully different cost structures – private treatment typically has higher lab and material costs in absolute terms, but a wider margin as a percentage of fee, while NHS work is usually lower-cost per item but thinner-margin once associate pay and volume-driven overheads are accounted for.
Lab and materials scale with treatment complexity more than NHS/private status directly – a crown costs roughly the same to fabricate whether it is delivered under a UDA or a private fee – but because private fees for the same treatment are typically set well above the equivalent UDA value, the lab cost represents a smaller share of the private fee, leaving more margin behind.
Associate pay is usually structured as a percentage split – commonly calculated separately for UDA-linked NHS work and private fee income. This split is one of the biggest single drivers of practice-level profitability, and one of the areas most practices haven’t revisited in years, even as their NHS/private mix has shifted underneath the original agreement.
How the mix changes taxable profit
At identical turnover, a practice with a higher share of private income typically shows meaningfully higher taxable profit than an NHS-heavy practice, because private income carries a wider margin through the same cost base – which means more Corporation Tax, but also considerably more cash retained after tax. Here is a simplified comparison of two practices with the same £450,000 annual turnover, operating as limited companies, but a different NHS/private split:
| Metric | Practice A (90% NHS / 10% private) | Practice B (50% NHS / 50% private) |
|---|---|---|
| NHS income | £405,000 | £225,000 |
| Private income | £45,000 | £225,000 |
| NHS margin after costs (approx. 30%) | £121,500 | £67,500 |
| Private margin after costs (approx. 45%) | £20,250 | £101,250 |
| Taxable profit | £141,750 | £168,750 |
| Approx. Corporation Tax due | £34,020 | £41,344 |
| Retained profit after tax | £107,730 | £127,406 |
Practice B pays £7,300 more Corporation Tax – but keeps £19,700 more in the business after tax, from the exact same £450,000 turnover.
This is the point that surprises a lot of practice owners: improving your private mix increases your tax bill in absolute terms, because you are genuinely more profitable – but it increases what you keep by considerably more. Treating a rising Corporation Tax bill as a warning sign, without looking at what it is actually built on, is one of the more common misreadings we see in practice finances. For the current rates and thresholds behind these figures, see gov.uk’s Corporation Tax guidance.
Improving the balance without burning out
The practices that grow private income sustainably do it by adding dedicated capacity and being deliberate about which treatments to prioritise, not by squeezing more patients into an already full NHS schedule. A few patterns that tend to work: dedicating specific sessions or days to private work rather than mixing it unpredictably into NHS clinics, investing in one or two higher-margin private services the practice can genuinely deliver well, and reviewing associate split agreements periodically so the incentive structure still matches how the practice’s income mix has actually evolved.
It’s also worth reviewing this at the individual associate level, not just the practice level – an associate dentist’s own tax position looks quite different depending on how their NHS and private earnings split, and on whether they are operating as a sole trader or through their own limited company. Our associate dentist tax calculator gives a quick, current-rates comparison for exactly that question. At the practice level, tracking NHS and private performance separately month to month – rather than discovering the mix shift a year later in the accounts – is exactly what our management accounts service is built to do.
Frequently asked questions
Does a higher private income share always mean a bigger tax bill?
Usually yes, in absolute terms, because a wider margin means higher taxable profit. But it also means significantly more retained profit after tax – the tax bill rises because the practice is genuinely more profitable, not because anything has gone wrong.
Is NHS or private dental work more profitable?
Private income typically carries a wider margin as a percentage of fee, largely because private fees are set by the practice rather than fixed by contract, while NHS UDA income is priced at a set value per treatment band regardless of the practice’s actual delivery cost.
How does the 2026 NHS contract reform affect practice tax planning?
The core UDA system stays the same, but new mandatory unscheduled care quotas, complex care pathway payments, and the optional quality improvement programme all change how NHS income should be modelled for 2026/27 onward – worth rebuilding your budget rather than rolling last year’s figures forward.
Should my practice reduce its NHS contract to grow private income?
Not necessarily, and rarely all at once. Most practices that grow private income successfully do it by adding capacity for it, rather than cutting NHS commitment first – the mix shift usually happens gradually as private demand and capacity grow together.
Does the NHS/private split matter differently for associates versus practice owners?
Yes. A practice owner’s tax position is driven by overall practice profitability and structure, while an associate’s is driven by their personal split of UDA-linked and private earnings and how they’re set up to receive it – sole trader or limited company – which is a separate calculation worth reviewing individually.
Get clarity on what your own mix is doing
If you’ve never actually modelled what your NHS/private split is doing to your practice’s profit and tax position, it’s worth finding out before your next accounts are filed.
No obligation, same-day response. Or call us now on 01224 042961.
