Selling a dental practice: why timing matters

Ads Thanki shares his top tips for carefully planning and timing your practice sale, ensuring a smooth and successful process.

For many dentists, their practice is not only their main source of income, but also one of their most valuable financial assets.

Selling a dental practice is a significant milestone that goes beyond a straightforward business transaction – it impacts patients, staff and the dentist’s professional reputation.

Careful planning is essential, as the transition involves exchanging a steady income – taxed at standard rates for a lump sum equivalent to several years of earnings, which may be subject to capital gains tax.

Given that most dentists will only sell their practice once, making informed decisions is crucial to maximising value and ensuring a successful outcome.

Understanding the value of your practice

Knowing what a practice is worth is the first step in planning for a sale. A professional valuation provides insight into market conditions, previous transactions, buyer demand and wider economic trends such as borrowing costs and private equity activity.

Having this knowledge allows practice owners to make strategic adjustments that enhance the value of their business before putting it on the market, giving them confidence in their decisions.

Timing the sale wisely

The best time to sell is when the owner is ready and the market conditions align with their financial expectations. Attempting to ‘time the market’ can be risky, as dental practice sales, like the broader mergers and acquisitions (M&A) sector, follow economic cycles.

Over the past few years, UK practice values have surged due to strong demand from corporate groups and private equity investment, combined with historically low interest rates. However, as borrowing costs have risen, buyers have become more selective.

While demand remains healthy, sellers should work with a reputable dental brokerage that has a proven track record of achieving or exceeding valuation expectations.

Managing market uncertainty

The economic and political landscape plays a key role in determining the market for dental practice sales.

With a new government, shifting fiscal policies and evolving tax legislation, financial markets and lenders may react with caution. Economic uncertainty can lead to delays in decision-making, tighter lending conditions and a slowdown in business acquisitions.

In such an environment, securing expert guidance is essential to navigating potential challenges.

Key tax changes and the end-of-year rush

Many dental practice owners aim to complete sales before the end of the tax year to mitigate the impact of policy changes. The coming fiscal cycle is expected to bring several tax adjustments that could affect business owners:

• National Insurance contributions (NICs): employer NIC rates will rise to 15%, and the threshold at which employers begin paying NICs will be reduced to £5,000
• Capital Gains Tax (CGT): the lower CGT rate will increase from 10% to 18%, and the higher rate from 20% to 24%. CGT on carried interest will rise from the current 10% to 28% range to 32%, with a further increase to 36% in future. CGT rates for business asset disposal relief and investors relief will also rise
• Inheritance Tax (IHT): the freeze on IHT thresholds will continue, while relief for business and agricultural assets will be capped at £1 million. Assets above this threshold will be taxed at 20%. Additionally, IHT on most shares listed on the Alternative Investment Market (AIM) will increase from 0% to 20%.

These impending changes mean that many sellers will be looking to complete transactions before April to avoid higher tax liabilities.

Where to start?

In this evolving market, it is essential to take a proactive approach rather than reacting to uncertainty. A specialist dental brokerage can support practice owners throughout the sale process, offering professional valuations and expert guidance on navigating tax and market changes.

With the right preparation and advice, dentists can achieve a smooth, successful and financially rewarding practice sale.

Read more from Ads Thanki:

• Eleven essential KPIs every dentist should monitor 
• How to ease the impact of inflation by being proactive
• Building a strong foundation for business growth
• A guide to launching a dental practice
• When should you start your own dental practice? – part two.

Follow Dentistry.co.uk on Instagram to keep up with all the latest dental news and trends.

Source link