You have found a property, worked out roughly what it will be worth once it is done, and someone has told you to offer 70% of that figure minus the refurb. It is a clean rule and it fits on a napkin. The problem is that it was written for American investors who never pay a 5% stamp duty surcharge on a second property. Drop that number into a UK deal unchanged and the maths quietly springs a leak.
Here is how the rule works, why the surcharge is the line that breaks it, and how to rebuild your maximum offer so the margin is real.
Where the 70% rule comes from
The rule is a fast screen for BRRR (buy, refurbish, rent, refinance) and flip deals:
Maximum offer = After-Repair Value × 70% − refurb cost
The 30% you knock off the after-repair value (ARV) is not profit. It is the gross spread that has to cover everything between buying and selling: purchase costs, finance, holding costs, selling costs, and only then your profit. Refurb is subtracted separately on top.
On a £200,000 ARV, that 30% is £60,000. In the US, transfer taxes are tiny, so almost all of that £60,000 survives as buffer and profit. In the UK, one line eats a large slice before you have done anything.
The line the US rule never had: the 5% surcharge
Buy an additional residential property in England and you pay standard Stamp Duty Land Tax plus a 5% surcharge on the whole price. The surcharge rose from 3% to 5% on 31 October 2024, and the standard nil-rate band dropped back to £125,000 on 1 April 2025 (gov.uk SDLT rates). The additional-property rates as at July 2026 are:
| Portion of price | Additional-property rate |
|---|---|
| Up to £125,000 | 5% |
| £125,001 to £250,000 | 7% |
| £250,001 to £925,000 | 10% |
| £925,001 to £1.5m | 15% |
| Over £1.5m | 17% |
The important part: the surcharge is a first-pound tax. There is no nil band for it. On a sub-£125,000 purchase you pay a flat 5% from the very first pound. On most BRRR and flip deals that lands at roughly 5% to 6% of the purchase price, and it comes straight out of your 30% buffer.
A worked flip at 70%
Take an ARV of £200,000 and a realistic, slightly padded refurb of £35,000. The rule says offer £200,000 × 70% − £35,000 = £105,000.
Here is the full appraisal at that offer, using bridging finance over about six months. Every figure is a clearly labelled worked example, not a market average.
| Line | Amount |
|---|---|
| Purchase price | £105,000 |
| SDLT (5% surcharge, additional property) | £5,250 |
| Buying costs (legals, searches, survey) | £2,000 |
| Refurb | £35,000 |
| Finance (bridging fee and interest, ~6 months) | £7,500 |
| Holding (council tax, insurance, utilities) | £2,500 |
| Selling (agent and legals) | £3,400 |
| Total outlay | £160,650 |
| Sale at ARV | £200,000 |
| Profit before tax | £39,350 |
So the 70% rule holds up here. It is a deliberately conservative screen, and even after the surcharge you clear roughly £39,000, close to 20% of ARV. Good.
Now watch what the surcharge does when you get greedy. In a competitive area people quietly creep to 78% to win the deal. Offer £200,000 × 78% − £35,000 = £121,000, keep everything else broadly the same, and profit before tax falls to about £22,050. The £5,250 surcharge was 13% of your profit at 70%. At 78% the surcharge (now £6,050 on the higher price) is 27% of a much thinner profit. The rule did not break because refurb changed. It broke because the buffer shrank while a fixed 5% tax stayed put.
That is the real UK adaptation. The 30% is a black box, and the surcharge lives inside it. Never move the multiplier up without itemising, because the surcharge scales with price and, above £250,000, the base rate jumps too.
BRRR is different: use the refinance, not the multiplier
For a flip you sell, so a percentage of ARV is a fair proxy. For BRRR you keep the property and pull your money back out by remortgaging. The number that decides whether a BRRR works is not 70% of ARV. It is how much cash stays trapped after you refinance, and that is set by the lender's loan-to-value, usually 75%.
Worked BRRR example: offer £100,000, refurb £28,000, ARV £165,000. Buy with a 75% BTL mortgage (£75,000 loan, £25,000 deposit).
- Cash in: deposit £25,000 + refurb £28,000 + SDLT £5,000 + buying costs £3,500 + holding £2,500 + refinance costs £2,500 = £66,500
- Refinance at 75% of £165,000 = £123,750, repay the £75,000 original loan, releasing £48,750
- Money left in the deal: £17,750
You now control a £165,000 asset with £41,250 of equity and £17,750 of your own cash still working. The flat 70% rule would have told you to offer £87,500 here and told you nothing about that money-left-in figure, which is the number that actually decides whether you can go and do it again. Run your own version, including the surcharge, through the BRRR calculator before you offer, because a £3,000 swing in refurb or a 5% cut to the refinance valuation can turn a full money-out deal into a partial one.
A cleaner UK rule of thumb
- Treat 70% as a screening filter, not the answer. If a deal fails at 70%, bin it. If it passes, do a full appraisal before offering.
- Add the surcharge as its own line. Budget 5% to 6% of the purchase price for SDLT on any additional property, and check the band above £250,000.
- Pad the refurb by 10% to 15% for the things the survey did not find.
- For flips, do not creep above 70% without re-running the profit line. The surcharge does not shrink when your margin does.
- For BRRR, ignore the multiplier and back-solve from the 75% refinance. The binding constraint is money left in, not a headline percentage.
A quick sizing shortcut when you are standing in the property: knock the 5% to 6% surcharge and roughly £8,000 to £12,000 of fixed buying, holding and selling costs off your gross spread before you let yourself feel good about the number.
One tax caveat
Flip profits are usually taxed as trading income or through a limited company paying corporation tax, not as a capital gain, so the pre-tax profit above is not what lands in your pocket. Which treatment applies depends on how you operate, and it is worth confirming before your first deal.
This is general information, not tax or financial advice. Rates and thresholds change, so check the current gov.uk figures and speak to a qualified adviser before you commit.
