Tax Intelligence Hub
How Tax Works on BRR / BRRR in the UK
Buy-Refurbish-Refinance largely mirrors buy-to-let tax, but the refurbishment and the refinance step add nuances that trip investors up — especially the fact that pulling money out on refinance is not a taxable event.
Educational guidance only. This is general information about how UK property taxes typically work by deal type — it is not tax, legal or financial advice, and rates and rules change. Always confirm your position with a qualified accountant or tax adviser before making any investment decision.
Buying-in taxes
- SDLT — residential bands plus the 3% additional-property surcharge on purchase.
- Uninhabitable property relief — a genuinely derelict property may fall outside "residential" for SDLT, potentially avoiding the surcharge. This is heavily scrutinised by HMRC — get advice.
- VAT on the buy — usually none on a second-hand residential purchase.
- Company purchase — 3% surcharge applies.
- Devolved equivalents (LTT / LBTT) for Wales and Scotland.
Taxes during the refurb & rent
- VAT on works — standard 20% on most refurbishment labour and materials, but a reduced 5% rate can apply to renovations of homes empty 2+ years or changing the number of dwellings.
- Capital vs revenue — improvement costs are capital (added to CGT base cost); repairs and maintenance are revenue (deductible against rental income). Getting this split right matters.
- Income Tax / Corporation Tax — on rental profit once let, with Section 24 for personally-held mortgages.
- Council Tax — payable during the refurb void; some councils grant empty-property discounts or apply premiums.
- No CGT on refinance — pulling money out via a remortgage is not a disposal, so no CGT is triggered at refinance.
Taxes when you sell
- Capital Gains Tax — on the gain, with refurbishment capital costs added to your base cost to reduce the taxable gain. Residential rates and 60-day reporting apply.
- Income Tax instead of CGT — if HMRC judges the intention was to sell rather than hold, profit can be taxed as trading income (like a flip), not a capital gain.
- Corporation Tax — on gains within a company structure.
- Inheritance Tax — the retained asset sits in your estate.
Tax lifecycle
Worked Example — Refurb & Refinance
£140,000 tired terrace, £30,000 refurb, refinanced at £200,000 GDV (75% = £150,000), then let at £950/month by a higher-rate taxpayer.
Improvements are capital, not deductible against rent.
A loan, not a sale — NO Capital Gains Tax is triggered.
Taxed as BTL with Section 24 on interest.
Refinance step — no tax event
The refinance releases cash tax-free because it is borrowing, not a disposal. CGT only arrives when you actually sell — and the £24,000 capital refurb is added to your base cost then, reducing the taxable gain.
Capital vs Revenue — how refurb costs are treated
Colour indicates the factually more/less favourable figure per row, not a recommendation.