Hotel & B&B Stamp Duty
How stamp duty applies to hotels, bed and breakfasts, guest houses, and boutique accommodations. Covers non-residential rates, the abolished MDR 6+ dwellings rule, going concern transfers, B&B classification, and owner's accommodation.
In this article
Key Takeaways
- Hotels and B&Bs operating commercially (C1 use class) pay non-residential SDLT: 0% (up to £150k), 2% (£150k-£250k), 5% (above £250k)
- Going concern transfers exclude goodwill, trade fixtures, and stock from SDLT — only the property element is taxed
- The 6+ dwellings rule historically allowed MDR claims for hotels with self-contained units; MDR was abolished June 2024
- B&Bs must demonstrate consistent commercial operation — occasional guest letting in a dwelling risks residential classification
- Hotels with an owner's flat are classified as mixed-use, paying non-residential rates on the entire purchase
- No additional property surcharge on commercial hotel/B&B purchases
- Leasehold hotels: SDLT also due on NPV of rent (0% to £150k NPV, 1% to £5m, 2% above)
Non-Residential SDLT Rates for Hotels
Hotels, guest houses, and B&Bs operated as commercial businesses (Use Class C1) are classified as non-residential property for stamp duty land tax. This gives them access to the lower non-residential rate bands, with a maximum rate of 5% compared to residential property where rates reach 12% or higher. Use our stamp duty calculator to estimate SDLT on your hotel or B&B purchase, or read the full commercial property SDLT guide.
| Purchase Price Band | SDLT Rate |
|---|---|
| Up to £150,000 | 0% |
| £150,001 to £250,000 | 2% |
| Above £250,000 | 5% |
C1 use class: hotels and guest accommodation
Hotels, hostels, boarding houses, and guest houses fall under Use Class C1 in the Town and Country Planning (Use Classes) Order 1987. C1 is a commercial use class — these properties are non-residential for SDLT regardless of the number of rooms. The key requirement is that guests pay for accommodation and the operator is running a commercial business.
Worked Examples
Example 1: £350,000 small B&B (6 rooms)
0% on first £150,000 = £0
2% on next £100,000 (£150k to £250k) = £2,000
5% on remaining £100,000 (£250k to £350k) = £5,000
Total SDLT: £7,000
Example 2: £2,000,000 boutique hotel
0% on first £150,000 = £0
2% on next £100,000 (£150k to £250k) = £2,000
5% on remaining £1,750,000 (£250k to £2m) = £87,500
Total SDLT: £89,500
Effective rate: 4.5%
Example 3: Going concern hotel — £3,000,000 total
Property: £2,400,000 | Goodwill: £400,000 | Trade fixtures: £200,000
SDLT on property element only:
0% on £150,000 = £0
2% on £100,000 = £2,000
5% on £2,150,000 = £107,500
Total SDLT: £109,500 (vs £139,500 on full price)
Saving of £30,000 through going concern apportionment.
Example 4: £800,000 hotel with owner's flat (mixed-use)
Entire price taxed at non-residential rates (mixed-use)
0% on £150,000 = £0
2% on £100,000 = £2,000
5% on £550,000 = £27,500
Total SDLT: £29,500 — no surcharge on owner's flat
The 6+ Dwellings Rule
Until recently, one of the most discussed SDLT issues for hotels and apart-hotels was whether individual rooms or suites could be counted as "dwellings" to access Multiple Dwellings Relief (MDR). This strategy was popular for apart-hotels where each room or unit had self-contained facilities.
MDR abolished June 2024 — no longer available
Multiple Dwellings Relief was abolished for transactions completing on or after 1 June 2024. Any SDLT planning strategy that relies on MDR for hotel or apart-hotel purchases is no longer valid. Hotels with 6 or more self-contained units are simply classified as non-residential C1 property and pay the standard commercial rates.
The abolition of MDR means the SDLT position for hotels has actually simplified. A hotel — whether 6 rooms or 600 rooms — pays non-residential rates on the purchase price. There is no longer any benefit to arguing that individual rooms constitute separate dwellings; the entire building is assessed as a single non-residential property at the rates above.
Apart-hotels after MDR abolition
Serviced apartments and apart-hotels with self-contained units are still generally classified as C1 (hotel and guest accommodation) where operated commercially. They pay non-residential rates. If units are sold individually as residential properties (change of classification), each unit is then taxed at residential rates.
Going Concern Transfers
Hotels and B&Bs are frequently sold as going concerns — trading businesses handed over to a new owner who continues the operation without interruption. In a going concern transfer, the purchase price encompasses both the property and the trading business.
For SDLT purposes, only the property element is subject to tax. The following elements can typically be excluded when properly apportioned:
- Business goodwill — brand reputation, booking platform rankings, star ratings, TripAdvisor reviews
- Trade fixtures — hotel furniture, commercial kitchen equipment, IT systems, reception desk equipment
- Stock — food, alcohol, consumables, toiletries
- Intellectual property — brand names, website domain, loyalty scheme data
- Bookings and deposits — future booking liability is not property
Professional valuation recommended
HMRC will compare the property element of a going concern apportionment against comparable hotel sales. An RICS-qualified hotel property valuer can provide a defensible market value for the property alone, which anchors the apportionment and provides evidence if HMRC opens an enquiry.
B&B Classification: Residential or Commercial?
The most significant classification risk for B&B purchases is that HMRC may treat the property as a residential dwelling rather than a commercial business. This would mean paying residential SDLT rates — potentially much higher than non-residential rates.
The key question is: is this property primarily a home with occasional paying guests, or a commercial business operating as a B&B?
Indicators of commercial B&B
- • Registered as a business (VAT, company, HMRC-registered)
- • Planning permission for C1 (hotel and guest accommodation) use
- • Premises licence or food business registration
- • Multiple letting rooms (typically 3+ guest rooms)
- • Year-round commercial operation
- • Commercial marketing (OTA listings, website)
- • Separate owner's accommodation from guest rooms
Residential classification risks
- • Residential planning use (C3 dwelling)
- • Only 1-2 rooms let occasionally
- • Owner uses the property as primary home
- • No business registration or premises licence
- • Letting only in peak season
- • Sold as "house with income potential"
- • Marketed through residential agents
Check planning use class before purchase
The property's planning use class at the date of purchase is the primary determinant of its SDLT classification. If the property has C1 planning permission and is operating as a B&B, non-residential rates apply. If it has C3 (dwelling house) planning permission, HMRC may classify it as residential regardless of its current B&B use.
Goodwill and Trade Fixtures
Hotel and B&B goodwill typically reflects the value of the brand, review scores, loyal customer base, and operational systems. For most hotels, a significant portion of the goodwill is location-based — a seafront hotel or city-centre property derives value from its position that persists regardless of who owns it.
Following the principles in HMRC v Denning (also relevant for pub and restaurant purchases), location-based hotel goodwill may be treated as part of the property value rather than separately excludable goodwill.
Excludable trade fixtures
Movable hotel contents — bedroom furniture, mattresses, soft furnishings, hotel IT systems, commercial laundry equipment, portable kitchen equipment — are chattels that can be excluded from SDLT if separately valued in the contract.
Note on permanent fixtures: The hotel building structure, fixed bathrooms, plumbing, integrated air conditioning, and fire suppression systems are all part of the property and cannot be excluded from SDLT. Only genuinely movable trade fixtures should be separately allocated in the going concern apportionment.
Owner's Accommodation (Mixed-Use)
Many hotels — particularly smaller boutique hotels and B&Bs — include an owner's flat, cottage, or apartment as part of the overall property. Where an owner's residence is part of the same purchase as the hotel, the property is classified as mixed-use.
Mixed-use properties pay non-residential SDLT rates on the entire purchase price — including the residential element. This is almost always advantageous:
- The owner's flat is taxed at the lower non-residential rates (max 5%)
- The additional property surcharge does not apply to mixed-use property
- Company purchasers avoid the 17% corporate residential surcharge
Owner's flat must be purchased in the same transaction
For mixed-use treatment, the owner's flat and the hotel must be purchased together in a single transaction. If the flat is purchased separately or at a different time, it falls to be taxed independently — potentially at residential rates with the additional property surcharge.
When reviewing a hotel purchase where the owner occupies an attached cottage or apartment, confirm with your solicitor that both elements are included in the same contract and conveyance to secure the mixed-use classification.
Common Questions
How much stamp duty on a hotel?
Hotels pay non-residential SDLT: 0% on the first £150,000, 2% on £150,001–£250,000, and 5% above £250,000. A £2m hotel costs £89,500 in SDLT. If bought as a going concern, goodwill and trade fixtures can be excluded, reducing the taxable amount.
Does the 6+ dwellings rule apply to hotels?
MDR was abolished for transactions completing on or after 1 June 2024. Hotels with self-contained units no longer benefit from any MDR-style relief. Hotels simply pay non-residential rates on the purchase price regardless of the number of rooms.
Is a B&B residential or commercial for stamp duty?
B&Bs operated commercially (C1 use class) are non-residential and pay commercial SDLT rates. A property primarily used as a dwelling with occasional guest letting may be classified as residential by HMRC. Consistent commercial operation, business registration, and C1 planning permission are key indicators.
Can I exclude goodwill when buying a hotel?
Yes. In a going concern transfer, goodwill (brand value, booking reputation, star rating premium) is excluded from SDLT. Trade fixtures are also excluded as chattels. Only the property itself is subject to SDLT. The allocation must reflect genuine market values.
What about an owner's flat within a hotel?
If the hotel includes an owner's flat purchased in the same transaction, the entire property is classified as mixed-use and pays non-residential rates on the full price. The owner's flat does not trigger the additional property surcharge.
See also: pub & restaurant stamp duty, mixed-use property SDLT, or browse all property type guides.
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Emma Richardson, MRICS
Chartered Surveyor & Property Tax Specialist
Emma Richardson is a RICS-qualified Chartered Surveyor with over 12 years of experience in UK property taxation. She founded Stamp Duty Calculator to help buyers understand the complex world of property transaction taxes.