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Practice accounts and tax

Annual accounts and the tax return are the easy half. The half that changes decisions is knowing your gross margin after drugs and consumables, your staff cost ratio and your EBIT margin while the year is still running — and knowing which of the 2026/27 changes actually reach a veterinary practice.

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Corporation tax: 19% / 25%with 26.5% at the margin between £50,000 and £250,000
Dividends rose: 6 April 2026to 10.75% and 35.75%, allowance still £500
Business rates: 48.0p / 43.2pstandard or small business — not the RHL rates

3/200the marginal relief standard fraction — a 26.5% effective rate in the middle band

£90,000taxable turnover, and VAT registration is compulsory

5 April 2031income tax thresholds are frozen until this date

11%weighted average EBIT margin across the CMA's sample of 36 independent practices

The accounts arrive too late to be useful, and the tax has moved

A practice principal usually meets their own numbers somewhere between eight and eleven months after the year they describe, formatted for filing rather than for running a clinical business. The profit figure is accurate and almost unusable: it does not separate the margin on dispensing from the margin on clinical work, it does not show staff cost as a proportion of fee income, and it arrives long after any of it could be changed.

Meanwhile 2026/27 has moved the tax underneath you in three places that matter — dividends went up on 6 April 2026, the corporation tax limits are being quietly halved or thirded for anyone with a property company, and business rates changed in a way that most of the coverage got wrong for veterinary premises. This page sets out all three plainly, then what we do about them.

If the practice is a company

Corporation tax, and the divisor that catches veterinary ownership

For the financial year beginning 1 April 2026 the rates are unchanged from FY2023 onwards: 19% on profits up to £50,000, 25% on profits over £250,000, and marginal relief in between at a standard fraction of 3/200. That produces an effective marginal rate of 26.5% on every pound of profit between the two limits — higher than the main rate, which is the part people find counter-intuitive.

Then the sentence that changes the answer: both limits are divided by one plus the number of associated companies, and reduced proportionately for an accounting period of less than twelve months. Veterinary ownership structures trip this constantly, because the common shape is not one company.

Structure	Divisor	19% up to	25% from
Practice company only	1	£50,000	£250,000
Practice company + property company	2	£25,000	£125,000
Practice company + property company + a locum company	3	£16,667	£83,333
Two practice companies + property company + a locum company	4	£12,500	£62,500

An illustrative example

Illustrative only. A practice company makes £120,000 of taxable profit. Owned on its own, the tax is £120,000 × 25% = £30,000, less marginal relief of (£250,000 − £120,000) × 3/200 = £1,950, so £28,050 — an effective rate of 23.4%. Now put the premises in a separate company owned by the same people. The divisor becomes two, so the upper limit is £125,000: the tax is £120,000 × 25% = £30,000 less (£125,000 − £120,000) × 3/200 = £75, so £29,925, an effective 24.9%. The same profit costs £1,875 more, and nothing about the practice changed. Add a locum personal service company and the upper limit falls to £83,333, which puts the whole £120,000 above it at a flat 25%: £30,000.

Association is not confined to shareholdings on a chart. HMRC's guidance at CTM03950 treats substantial commercial interdependence — financial, economic and organisational links — as capable of creating an association. A property company letting premises to the practice at a rent, sharing customers or management, is exactly the fact pattern that guidance describes. If you have more than one company, the divisor is a question to answer deliberately rather than assume.

Getting the money out

Income tax and the dividend rise on 6 April 2026

Income tax for 2026/27 in England, Wales and Northern Ireland: a personal allowance of £12,570, 20% on the first £37,700 of taxable income, 40% from £37,701 to £125,140, and 45% above that. The higher-rate threshold is £50,270. Those figures are frozen until 5 April 2031, which means a practice that grows its profits pushes its owners further up the scale every year without a single rate changing. HMRC's own assessment is that the freeze brings 700,000 more individuals into income tax by 2030/31 than CPI indexation from 2028/29 would have.

The change that matters most to an owner-director on a low salary and dividends took effect on 6 April 2026:

Dividend band	To 5 April 2026	From 6 April 2026
Basic rate	8.75%	10.75%
Higher rate	33.75%	35.75%
Additional rate	39.35%	39.35%
Dividend allowance	£500	£500

Two percentage points on the basic and higher rates is the single most material 2026/27 change for anyone extracting profit from a practice company. On £60,000 of higher-rate dividends that is £1,200 a year more, every year, for taking out the same money. It does not change the answer for most established practices, but it moves the arithmetic on incorporation, and any comparison prepared before April 2026 understates the cost of a company. The incorporation calculator runs it on the new rates, and incorporation for vets sets out where each structure genuinely works.

If the practice is a partnership or a sole trade

The business pays no tax of its own. A partnership files a return and each partner is taxed personally on their allocated profit share through self assessment, whether or not the money was drawn, with Class 4 National Insurance at 6% between £12,570 and £50,270 and 2% above. Stack income tax and Class 4 and the marginal cost of the next pound of profit share is 42% above £50,270 and 47% above £125,140. An unincorporated practice is also inside Making Tax Digital for Income Tax on the timetable set out on the locum vet accounts page, where a company is not.

VAT

Standard-rated, but for a reason worth knowing

Registration is compulsory at £90,000 of taxable turnover in the last twelve months, or where it is expected to be exceeded within the next 30 days. That threshold has applied since 1 April 2024. Every VAT-registered business is already inside Making Tax Digital for VAT.

On the rate: veterinary services carry VAT at 20%, and it is worth being accurate about how that conclusion is reached, because it is an inference rather than a quotation. The VAT medical exemption in Schedule 9 Group 7 of VATA 1994, expanded in VAT Notice 701/57, covers registered doctors, dentists, opticians, pharmacists and other health professionals — human health professionals. Veterinary surgeons are not within it. With no relief available, the standard rate applies. No single HMRC page states it in terms, and the gov.uk page listing VAT rates on different goods and services has no veterinary entry at all.

Medicines are on firmer ground. VAT Notice 701/15 paragraph 9.4 states that medicines are not covered by the zero rate even where they are administered in an animal's feed, and HMRC's test is that a product with a marketing authorisation from the VMD is a medicine and is standard-rated. Zero-rated animal feed does not carry over: adding a medicinal substance that alters the essential nature of a product makes it standard-rated. Veterinary medicines supplied to certain not-for-profit organisations can be zero-rated under a separate relief.

Needs specific advice

Pet care plans are the open question. No HMRC guidance addresses whether a pet health plan is a single standard-rated supply, a mixed supply, or contains an insurance element carrying Insurance Premium Tax. That is now a live commercial question rather than an academic one, because draft Article 9 of the CMA's Order will require you to publish each component's standalone price — which is the same exercise as deciding whether the plan is one supply or several. It needs specific advice on your own plan terms, and anyone who answers it confidently from general principles is guessing.

Premises

Business rates 2026/27 — the change that did not apply to you

England moved to five multipliers from 1 April 2026, and the reporting around it was largely about the new lower rates for retail, hospitality and leisure property. A veterinary practice is not an RHL property, so those rates are not yours.

Multiplier 2026/27 (England)	Rate	Applies to a practice?
Standard	48.0p	Yes — rateable value £51,000 and over
Small business (RV not over £50,999)	43.2p	Yes
Standard retail, hospitality and leisure	43.0p	No
Small business retail, hospitality and leisure	38.2p	No
High value (RV £500,000 and over)	50.8p	Only a very large site

The 2026 revaluation also took effect on 1 April 2026. New rateable values were published on 26 November 2025 and are based on rental values at the antecedent valuation date of 1 April 2024 — so they reflect the rental market of two years ago, not today's. A redesigned Transitional Relief scheme phases increases in over three years.

What that means in practice for a practice principal: check your new rateable value against the 1 April 2024 rental evidence for your building rather than assuming the valuation is right, and do not budget for a rates reduction on the strength of coverage that was about cafés and shops.

Your accounts describe a year you can no longer influence. Management figures describe one you can.

Practice accounts and management reporting

What you get

Compliance done, and the four numbers you run the practice on

Annual accounts

Company, partnership or sole trader accounts prepared and filed, with the associated companies position confirmed rather than assumed.

Tax returns

Corporation tax, partnership and personal self assessment returns, joined up so the same profit figure appears in all of them and nothing is taxed twice by accident.

Management figures

Gross margin after drugs, consumables, laboratory and referral costs. Staff cost ratio. EBIT margin. Cash. The same four every period, delivered while the period can still be changed.

Work out your margin

VAT

Returns prepared and filed under Making Tax Digital, with the medicines and services split handled properly and the pet care plan question flagged rather than fudged.

Premises and equipment

Capital allowances claimed correctly — the £1,000,000 Annual Investment Allowance, and full expensing where the practice is a company buying new kit.

Capital allowances

Every date in one place

Accounts, corporation tax, VAT, payroll, self assessment, the RCVS renewal on 30 April and premises registration on 1 April.

The calendar

Accounts and tax questions

Common questions about practice accounts and tax

What rate of corporation tax does a veterinary practice company pay?

For the financial year beginning 1 April 2026 the small profits rate is 19% on profits up to £50,000 and the main rate is 25% on profits over £250,000. Between those limits marginal relief applies with a standard fraction of 3/200, which produces an effective marginal rate of 26.5% on every pound of profit in that band. The structure has been unchanged since 1 April 2023. The detail that costs practices money is that the £50,000 and £250,000 limits are divided by one plus the number of associated companies, and reduced proportionately for an accounting period shorter than twelve months.

How do associated companies affect a practice's corporation tax?

Both marginal relief limits are divided by one plus the number of associated companies. A practice company on its own keeps £50,000 and £250,000. Add a property company holding the premises and the divisor is two, so the limits fall to £25,000 and £125,000. Add a locum personal service company owned by the same people and the divisor is three: £16,667 and £83,333. Association is not limited to formal group structures — HMRC's guidance at CTM03950 treats substantial commercial interdependence, meaning financial, economic and organisational links, as capable of creating it. That is a common shape in veterinary ownership and it is frequently missed.

Is a veterinary practice charged the lower business rates multiplier for retail and hospitality?

No, and this is worth being precise about because a good deal of reporting on the April 2026 business rates changes does not apply to a veterinary practice. From 1 April 2026 England has five multipliers. A practice pays the standard multiplier of 48.0p, or the small business multiplier of 43.2p where the rateable value does not exceed £50,999. It does not pay the retail, hospitality and leisure rates of 43.0p and 38.2p, because a veterinary practice is not an RHL property. So the headline that April 2026 brought a rates cut is not a headline about your premises.

Is VAT charged on veterinary services?

Yes, at the standard 20% rate, though it is worth understanding why rather than taking it on trust. The VAT medical exemption in Schedule 9 Group 7 of VATA 1994 covers registered doctors, dentists, opticians, pharmacists and other human health professionals. Veterinary surgeons are not within it, so no relief applies and the standard rate follows. Medicines are separately standard-rated: VAT Notice 701/15 paragraph 9.4 says medicines are not covered by the zero rate even where administered in feed. No single HMRC page states the position for veterinary services in terms, so treat 20% as the correct consequence of there being no relief rather than as a quotable sentence.

When does a veterinary practice have to register for VAT?

At £90,000 of taxable turnover, a threshold in place since 1 April 2024. There are two tests. The backward look: once rolling twelve-month taxable turnover exceeds £90,000 you must register within 30 days of the end of the month in which it was breached. The forward look: if you expect to exceed £90,000 within the next 30 days alone, you register by the end of that 30-day period. For most practices the question is academic because consultation and treatment income passes £90,000 quickly, but it matters for a new practice in its first year and for a small single-handed operation.

What management figures should a practice owner actually look at?

Four numbers, monthly or quarterly, always the same four so the trend is readable. Gross margin after direct costs — drugs, consumables, laboratory and external referrals — because that is the line the CMA remedies touch. Staff cost as a percentage of turnover, which in a clinical business is the largest single cost and the one that drifts. EBIT margin, so you can see where you sit against the CMA's own sample of 36 independent practices, which ranged from minus 9% to plus 34% with an 11% weighted average. And cash, separately from profit, because dispensing stock and equipment finance detach the two.

Ready when you are

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