You usually pay 20% Value Added Tax, more commonly known as VAT, when buying products or services. The 20% rate has to be charged by companies that are VAT registered. A business has to be VAT registered once its turnover reaches £85,000. You can use tradespeople and pay two different VAT rates.

Example of refurbishment costs where the tradesperson is not VAT registered 

£10,000 Refuirboshment costs

£0 VAT for someone that is not VAT registered

£10,000 total fee paid to the tradesperson carrying out refurbishment works on your residential buy to ley property

Example of refurbishment costs where the tradesperson is VAT registered 

£10,000 Refuirboshment costs

£2,000 VAT for someone that is not VAT registered

£12,000 total fee paid to the tradesperson carrying out refurbishment works on your residential buy to ley property

As you can see that you would pay £2,000 more because you are using a VAT registered tradesperson.

Please note that buy to let rental income is VAT exempt. This means that landlords that rent out their buy to let property cannot charge VAT to their tenants. This also means that landlords who incur VAT on labour or materials cannot claim the VAT back.