How Property Flip Profit Is Calculated

Summary

A property flip means buying a property, renovating it, and reselling at a higher price. The headline gross profit (sale price minus purchase price) is always much larger than the actual net profit, because stamp duty, bridging finance costs, renovation, holding costs, agent fees, and tax all eat into the margin. This calculator models every cost layer to show the true net profit and return on investment.

How it works

The calculation follows a cost waterfall: start with the gross profit (after repair value minus purchase price), then subtract each cost category in sequence to arrive at the taxable gain and finally the net profit.

Cost categories

1. Purchase costs — Stamp Duty Land Tax (SDLT), legal fees, survey/valuation
2. Renovation costs — the cost of works to bring the property to its after repair value (ARV)
3. Finance costs — bridging loan interest (monthly rate × loan amount × holding months) plus an arrangement fee (typically 2% of the loan)
4. Holding costs — council tax, insurance, utilities, and other costs while the property is empty
5. Selling costs — estate agent commission (% of sale price) plus conveyancing legal fees

Tax treatment

HMRC distinguishes between capital gains (a one-off investment) and trading income (regular flipping activity):

• Capital Gains Tax (CGT): 18% basic rate / 24% higher rate on residential property, with a £3,000 annual exempt amount (2025/26). No National Insurance.
• Income Tax (trading): 20% / 40% / 45% marginal rates with no annual exemption, plus Class 4 National Insurance at 6% on profits between £12,570–£50,270 and 2% above £50,270.

If you flip properties regularly, HMRC is likely to classify the activity as trading. A single renovation-and-sell is more likely to qualify for CGT treatment. The distinction can make a significant difference to the tax bill.

The formula

Finance costs

The 70% rule

The 70% rule is a US-origin heuristic. In the UK, the 5% additional property SDLT surcharge and high bridging rates mean 70% may not leave enough margin for additional-property buyers.

Worked example

Inputs explained

• Purchase price — the price you pay for the property
• After repair value (ARV) — the expected resale price after renovation, based on comparable sold prices
• Renovation cost — total budget for all works (kitchen, bathroom, structural, cosmetic)
• Holding period — months between purchase and sale completion
• Bridging loan rate — monthly interest rate charged by the bridging lender (typically 0.55%–1.25%)
• Loan-to-value (LTV) — the percentage of the purchase price funded by the bridging loan (max typically 75%)
• Buyer type — standard (first or only property) or additional property (+5% SDLT surcharge)
• Tax treatment — CGT (one-off investment) or Income Tax (regular trading activity)
• Tax band — your marginal tax rate (basic 20%, higher 40%, additional 45%)
• Legal fees — conveyancing solicitor fees for purchase and sale
• Estate agent fee — percentage of the sale price paid to the selling agent
• Survey/valuation — cost of a property survey or lender’s valuation
• Monthly holding costs — insurance, utilities, council tax, and maintenance while the property is empty

Outputs explained

• Net profit — the final profit after all costs and tax have been deducted
• ROI % — net profit divided by total cash invested (deposit + purchase costs + renovation + holding + finance)
• Annualised ROI % — ROI projected to a 12-month equivalent using compound growth
• Profit per month — net profit divided by holding months
• Total cash required — the total upfront cash needed (deposit plus all costs incurred before sale)
• 70% rule — whether the purchase price is within the industry guideline of ARV × 70% minus renovation costs
• Cost breakdown — a visual chart showing where costs arise (stamp duty, legal, renovation, finance, holding, agent, tax)

Assumptions & limitations

• England and Northern Ireland SDLT only. Scotland (LBTT) and Wales (LTT) have different stamp duty regimes — this calculator does not model them.
• Flat tax rate applied. The calculator applies a single marginal rate rather than modelling your full income. For income tax treatment, if the profit spans multiple bands (e.g., crosses from basic to higher), the actual liability may differ.
• NI Class 4 uses a simplified model. The calculator assumes the flip profit is the only self-employment income for NI purposes.
• No VAT modelled. Some renovation costs may attract VAT depending on the property’s listed status and the type of work.
• The arrangement fee is assumed at 2%. Some lenders charge 1%–2%; the calculator uses 2% as a conservative default.
• No exit fees. Some bridging lenders charge exit fees; these are not included.
• Bridging interest is simple interest. Most bridging loans charge simple monthly interest, not compound — the calculator correctly uses simple interest.

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