Why Growing Dental Practices Get Hit With Tax Bills They Didn’t Expect — and How to Forecast Without Breaking Cash Flow

As a growing dental practice, your production’s climbing quarter by quarter — but your cash feels tight.
Drawings increase. You hire a Practice Manager. You block-book chair time. Then — it hits:
A £24,100 corporation tax bill… followed by an £18,720 self-assessment demand.
Now you’re wondering: Can we actually afford this growth?

That’s not bad bookkeeping. That’s a growth-stage tax mismatch.

Most growing dental practices hit the £800K–£1.2M range with three income streams:

• NHS via sole trader (to retain contract)
• Private via Ltd company (to optimise profits)
• Property via SPV (often flats or buy-to-lets)
  

But they still budget like they’re running one tidy £500K clinic. That’s when the cracks show.

As a dental accountant and CFO since 2019, I’ve helped 53 UK clinics fix this. Not with “clever tax hacks,” but with cash-first forecasting that covers all income types — and shields drawings before tax hits.

Just like one client in Kent: £910K turnover (15% NHS, 85% private, plus a property SPV). By December, they owed £42K in SA + CT — but only had £18K in the bank.
We realigned entity reserves, capped drawings, and within 10 weeks, forecasted £31K for liabilities. Outcome: zero panic, zero tax delays, full pay protected.

Fast Takeaway:

• If your tax forecast only covers your Ltd company — you’re missing up to 45% of real liability
  
• If your drawings don’t match CFFP™ tax logic, you’ll erode your cash faster than you scale
• SA, CT, and property taxes must be forecasted per entity, per quarter — not guessed in January
  

TLDR:

Growing practices often “feel profitable” but run blind into tax shocks.
Cash doesn’t just flow out — it gets claimed in arrears.
The solution? Forecast tax the same way you plan team growth: by structure, by timing, by cash impact.

Why Do Growing Dental Practices Get Hit With Surprise Tax Bills — Even When Profits Are Rising?

Growing dental practices get hit with unexpected tax bills because they mistake profit for available cash, and they underestimate the time lag between income generation and tax liabilities.

From my experience as a dental accountant and CFO, the fastest-growing practices — £800K to £1.2M range — often fall into the same pattern:

• Profits look great on paper
• Drawings increase every quarter
• But cash doesn’t match what HMRC expects

Internal Dentpulse data from 53 clinics show:

• 71% of tax shocks happened in practices with rising profit and no cash logic forecast
• £17,800 = average CT + SA shortfall we saw in Q3 2023
  
• 61% of mixed-income principals were forced to pause drawings or delay VAT/CT/SA due to unplanned outflow
  

This isn’t a tax issue — it’s a cash sequencing issue. And it usually starts with three blind spots:

1. Tax spikes triggered by growth-stage events
2. Forecasting breakdowns across income types
3. Drawing timing that drains reserves before tax hits

Let’s break those down.

What Triggers a Tax Spike in Growing Clinics — and How Do You Model It in Advance?

Tax spikes are often caused by timing gaps — not tax increases. These events build tax exposure silently:

From my CFO desk: One £1.04M mixed practice in Essex hit £28K in SA + CT across 3 entities — but had only £11K liquid. Why? None of the income spikes had forecasted tax overlays.

CFFP™ Tip: Model tax like a CapEx. If drawings or profits increase, create a future-pair forecast that marks when tax will hit — not when it’s earned.

Why Most Tax Forecasts Fail in Mixed NHS + Ltd + Property Structures

Most growing dentists have this setup:

• NHS income via sole trader
• Private income via Ltd company
• Rental income via property SPV or personally held

Each has different tax year ends, rules, and payment timing. When you try to model them together, here’s what typically breaks:

What I’ve seen: Clinics growing from £750K to £1.2M assume “year-end” equals tax due date. It doesn’t. The lag causes them to draw cash that should’ve been earmarked.

Solution: Map each income type with a separate CFFP™ stream, then consolidate at group level.

How to Sequence Drawings Without Breaking MCBTP™ Before a Tax Bill

Drawings aren’t the issue — drawings without tax overlay are.

Here’s the MCBTP™ risk logic:

• You forecast £14K/month in free cash
  
• You draw £10K/month
  
• But you haven’t factored £24K CT + £18K SA pending in 4 months
  → Now your MCBTP™ is at risk and drawings collapse
  

Safe Drawings Rule:

Draw only what your 13-week MCBTP™ can sustain after forecasting all tax liabilities

Client Snapshot: A £980K private practice in Surrey withdrew £30K over Q3–Q4. They forgot to factor £36.2K in deferred CT + SA. We rebuilt their forecast using Dentpulse — and restructured pay to stabilise the £12K/month buffer by March

Why is tax forecasting so much harder once your practice crosses £800K?

Tax forecasting so much harder once your practice crosses £800K for cash flow purposes because your income structure splits — but your cash habits don’t. At the growth stage, most UK dentists operate as a sole trader for NHS, a limited company for private, and hold at least one property under an SPV. Each structure has its own tax rhythm — but most owners still plan like everything is one pot.

From my experience as a dental accountant and CFO for 67 growing practices since 2019, this split causes the most tax stress not because tax rates are higher — but because timing misaligns. That’s the real cash flow killer.

Table: Tax Timing Logic by Income Type (Growth-Stage Structures)

From our internal data at Dentpulse, we found out:

• 61% of growth-stage practices with 3 income types faced tax-linked cash flow issues in their first year post-£850K
  
• 42% of those paid Corporation Tax and Self-Assessment from the same reserve — triggering owner pay deferral
  
• 27% delayed VAT reclaim or equipment upgrades to manage surprise SA bills — even though VAT is not applicable to core dentistry
  

Case Study: How a Growing Practice Got Caught Off-Guard

A £910K practice in Hertfordshire had a smart split:

• 20% NHS via sole trader
  
• 75% private via limited company
  
• One rental flat in a separate SPV
  

But by January, they were hit with:

• £18,720 Self-Assessment
  
• £24,100 Corporation Tax (Ltd)
  
• £3,200 CT from SPV (property)
  

They had just £17K in reserves. The result?
No drawings for 2 months. CapEx delay. Director tax paid via overdraft.

We rebuilt their forecast using entity-level MCBTP™ and added CFFP™ overlays — within 6 weeks, they had £31.4K banked and 3-month tax cover set per stream.

Do This / Not That: Tax Forecasting Edition

How to Forecast Tax Across All Income Streams — Without Sacrificing Drawings or Buffer in a Growing Practice

To forecast tax effectively across NHS, Ltd company, and property income streams, growing dental practices should implement a structured approach that includes: (1) establishing separate tax reserves for each income stream, (2) aligning tax payment schedules with cash flow forecasts, and (3) conducting regular reviews to adjust for changes in income and tax legislation.

From my experience as a dental accountant and CFO, practices that proactively manage tax forecasting avoid unexpected liabilities that can disrupt cash flow and hinder growth.

Tax Forecasting Framework for Growing Dental Practices

Do This:

• Maintain distinct financial records for each income stream to facilitate accurate forecasting.
  
• Set aside tax reserves monthly based on projected liabilities.
  
• Regularly consult with a dental financial advisor to stay updated on tax obligations.

Not That:

• Avoid pooling all income streams into a single account, which can obscure individual tax liabilities.
  
• Don’t delay tax planning until payment deadlines approach; proactive planning is key.
  

Case Study: Implementing Effective Tax Forecasting

A dental practice in Manchester, with a combined income of £1.1M from NHS and private services, faced a surprise tax bill of £45K due to inadequate forecasting. By restructuring their financial management to separate income streams and establish dedicated tax reserves, they achieved a surplus of £20K in their tax account within a year, ensuring timely payments without impacting operational cash flow.

Implementing a structured tax forecasting model not only safeguards against unexpected liabilities but also supports sustainable growth by ensuring financial stability.

Strengthen Your Cash Position Before Tax Season Tightens

If rising tax liabilities are squeezing your cash flow, the root issue often isn’t the tax bill — it’s the lack of a protective cash buffer.
Most £800K–£1.2M clinics get hit hardest not because taxes increase, but because their reserves remain stuck at “startup levels” while their financial commitments scale.

That’s why the next guide in this series shows you how to build the only safeguard that consistently absorbs tax shocks, payroll spikes, and timing delays:

Read next: How to Build a 12-Week Cash Buffer — Without Sacrificing Dental Practice Growth
Inside, you’ll learn the Dentpulse buffer formula, weekly target logic, and the cash-sequencing model growing clinics use to stay liquid — even when tax hits across multiple entities.

Your Next Steps: Protecting Cash Flow from Surprise Tax Hits in a Growing Dental Practice

You now understand why tax gets painful at the growth stage — and how to forecast it before it breaks your buffer.

Here’s how to act:

Option 1: Manual Forecasting (DIY Route)

You can build a forecast without Dentpulse — but you need precision and discipline across three layers:

1. Split income streams
   Keep NHS (sole trader), Ltd (private), and property SPV accounts clearly separated. Use a distinct forecast per stream.
2. Map tax payment months
   For each stream, log your SA (Jan/July), CT (9 months post year-end), and any property tax liabilities. Pair against your 13-week cash view.
3. Reserve monthly
   Create monthly tax provisions per entity:
   • NHS → 30% of net drawings
   • Ltd → 19%–25% of profits
   • Property → 20% of net income (if SPV) or 40% if personally held
4. Adjust quarterly
   Review profits + forecasts quarterly. As you scale, liabilities accelerate. Your forecast must too.

Reality check: This method works — but many dentists skip it due to time, software gaps, or mixing entities in one forecast.

Option 2: Use Dentpulse + Dentledger

Dentledger handles the day-to-day:
• NHS and Ltd bookkeeping
• Year-end accounts and tax returns
• Property income and mortgage structure
• VAT-free treatment logic

Dentpulse tracks the big picture:
• Real-time cash + tax forecasts across all entities
• MCBTP™ alerts if drawings or PAYE are at risk
• CT + SA payment planner
• Role-based impact forecasting

💬 From my experience: The practices that forecast tax like they forecast UDA delivery — monthly, mapped, entity-by-entity — never scramble for last-minute funding.

👉 Book a 15-min Forecast & Tax Readiness Call

Frequently Asked Questions

What’s the simplest way to reserve for tax if I’m still using one account?

Direct answer:
Split your drawings manually. From my observation, practices that fail to separate personal and practice funds often misjudge tax affordability.

Do this:
• Transfer 30% of all drawings to a tax reserve account monthly
• Label it “Do Not Touch – Tax” in your banking app
• Reconcile quarterly with your accountant

Not that:
• Don’t assume last year’s tax bill = this year’s. If your income has jumped, your liability has too.

I’m hiring and buying equipment. Should I delay tax until cash flow improves?

Short answer:
No. From what I’ve seen, deferring tax to fund growth leads to compound strain.

Use CFFP™ logic:
Pair major outflows (new hire, CapEx) with actual income — not by delaying liabilities.

Mini case:
One £980K mixed practice delayed CT to fund a £34K chair. Within 90 days, they owed £21.4K CT, £18.2K SA — and cash had dropped to £6.3K. They had to refinance the equipment and delay PAYE.

How can I check if my accountant is forecasting tax properly for my structure?

Simple test:
Ask them: “Are we running tax projections per entity — NHS, Ltd, and property — or as one lump?”

If they provide split forecasts and tax reserve plans — you’re covered
If not, your cash flow may be blind to upcoming liabilities

From my experience, a lack of entity-level forecasting is the #1 cause of “surprise tax bills” in £800K–£1.5M practices.