How Smart Dentists Can Pay Less Tax

Dr Dan Shaffer
Dec 10, 2025
4 min read

Updated: Jan 2

The Budget Quietly Changed the Rules Again. Here’s How UK Dentists Can Pay Less Tax in 2026

Every Budget comes with headlines. And every Budget comes with consequences that only become obvious months later when accountants start saying, “This used to work, but it doesn’t anymore.”

For UK dentists, the most recent Budget did not introduce one dramatic tax grab. Instead, it continued a familiar and far more effective strategy. Quietly increasing the tax burden by changing thresholds, reducing allowances and nudging more income into higher tax bands.

The danger is not that dentists will suddenly pay more tax overnight. The danger is that those who do nothing will drift into paying far more than they need to.

This year, tax planning is not optional. It is one of the few remaining levers you can still pull. Why many dentists will pay more tax without earning any more

The single biggest driver of higher tax bills is not rising profits. It is fiscal drag.

Income tax thresholds remain frozen. Dividend allowances are now minimal.

Capital gains tax on disposals is higher than it used to be. Meanwhile, practice profits, associate earnings and retained company cash continue to rise nominally even when real terms growth feels modest.

The result is predictable:

• More dentists falling into higher and additional rate tax bands

• More associates losing child benefit unexpectedly

• More practice owners finding dividends far less efficient

• More clinicians working harder for shrinking marginal returns

In short, doing nothing has become expensive.

Associates: the biggest risk group for silent tax leakage

Self employed associates are often the least optimised from a tax perspective.

Many are earning well, but operating without structure. No pension strategy, no income smoothing, limited planning around timing and often no separation between personal and professional cash.

Common issues we are seeing include:

• Income drifting into the additional rate band unintentionally

• Student loan repayments being triggered unnecessarily

• No use of pensions beyond the basics

• No plan for irregular income months

• Large January tax bills funded with stress rather than strategy

For associates, the priority this year is not clever loopholes. It is building simple systems.

Key actions to consider:

• Pension contributions used deliberately rather than reactively

• Reviewing whether profits should be levelled year to year

• Understanding the real marginal tax rate, not just headline bands

• Putting aside tax weekly, not quarterly or annually

The dentists who struggle least are rarely the highest earners. They are the most organised.

Practice owners: dividends are no longer the easy win to pay less tax

For years, the owner model was relatively straightforward. Pay yourself a modest salary. Extract profits via dividends. Keep things simple.

That era has quietly ended.

With dividend allowances now minimal and higher rate dividend tax biting much earlier, owners relying on old structures are seeing a significant drop in take home pay.

This does not mean ownership is no longer attractive. It means the strategy needs updating.

Smarter approaches now include:

• Rethinking salary versus dividend balance

• Using pensions at company level where appropriate

• Retaining profits deliberately rather than extracting everything

• Planning extraction over multiple years, not one

• Using the company as a planning vehicle, not just a pass through

Importantly, not every pound needs to come out immediately. Dentists who understand this gain flexibility. Those who do not pay for it in tax.

Capital gains, exits and the cost of poor timing

Another quiet shift has been the change in how disposals are taxed.

Whether it is selling a practice, part of a practice, or other business assets, capital gains tax has become more significant. The difference between planning an exit properly and leaving it late can now be six figures.

Key considerations include:

• Timing of sales relative to income in that year

• Use of available reliefs before they are restricted or removed

• Whether ownership structures still make sense

• Sequencing disposals rather than doing everything at once

Even dentists who are years away from selling should be thinking about this now. Exit planning is no longer a last year activity. It is a multi year tax strategy.

Pensions: still one of the strongest legal tax shelters available

Despite political noise, pensions remain one of the most powerful tools UK dentists have.

The annual allowance is generous. Contributions reduce taxable income. Growth is tax sheltered. For higher earners, the relief can be substantial.

Yet many dentists still underuse pensions due to outdated fears or misunderstanding.

This year, pensions can be used to:

• Pull income out of higher or additional rate bands

• Reduce student loan repayments

• Restore lost child benefit

• Create long term extraction routes from companies

• Smooth profits in volatile years

The key is not maxing pensions blindly. It is using them deliberately as part of a wider plan.

The mindset shift that actually saves tax

The dentists who consistently pay less tax share one trait. They stop asking how to pay less tax and start asking how to structure their life and business better.

Tax efficiency follows structure. It does not come from last minute fixes.