Credibrate

Rental Yield Calculator

Calculate the gross and net rental yield on a buy-to-let property. Enter the property value, monthly rent, and annual running costs.

Reviewed by Richard Ross · Last updated April 2026

How Rental Yield Calculator works

Gross rental yield

Gross yield = (Annual Rent ÷ Property Value) × 100. This is the simplest measure — it ignores costs. Example: £14,400 annual rent on a £250,000 property = 5.76% gross yield.

Net rental yield

Net yield = ((Annual Rent − Annual Costs) ÷ Property Value) × 100. Annual costs include: letting agent fees (8–15% of rent), maintenance and repairs, landlord insurance, gas safety and electrical certificates, and void periods. Mortgage interest is typically excluded from yield calculations.

What is a good rental yield?

Average UK gross yields range from 3–4% in prime London areas to 6–9% in northern cities (Manchester, Liverpool, Leeds, Newcastle). A net yield of 4–6% after costs is generally considered attractive for buy-to-let in the current market.

Yield vs capital growth

Buy-to-let returns combine yield (rental income) and capital growth (property appreciation). High-yield areas often have lower capital growth; prime areas often offer lower yield but stronger capital appreciation. Total return is the sum of both. Note that capital growth is only realised on sale and is subject to Capital Gains Tax — which affects the net return calculation significantly.

Capital gains tax on property sales →

UK landlord tax: how it affects net yield

Since April 2020, landlords can no longer deduct mortgage interest from rental income. Instead, they receive a 20% tax credit on mortgage interest (Section 24). Higher-rate taxpayers therefore face a significantly higher effective tax burden, which reduces net yield compared to pre-2017. Landlords must also pay income tax on rental profits at their marginal rate (20%, 40%, or 45%), making gross-to-net comparisons tax-dependent.

Typical landlord running costs in 2025

Realistic annual running costs for a standard UK buy-to-let typically include: letting agent fees of 8–15% of annual rent (fully managed), landlord insurance of £150–400, annual gas safety certificate at £60–120, five-yearly electrical installation condition report (EICR) at £120–200 amortised, and a maintenance reserve of 1% of property value per year. On a £250,000 property letting for £1,200/month, total costs often run to £3,000–5,000 per year before mortgage interest.

Worked example: £250,000 property at £1,200/month rent

Property value: £250,000. Monthly rent: £1,200. Annual rent: £14,400. Gross yield: £14,400 ÷ £250,000 × 100 = 5.76%. Running costs (annual): — Letting agent (10% of rent): £1,440 — Landlord insurance: £300 — Gas safety certificate: £90 — Maintenance reserve (1% of value): £2,500 — Void period allowance (3 weeks): £830 Total costs: approximately £5,160. Net annual income: £14,400 − £5,160 = £9,240. Net yield: £9,240 ÷ £250,000 × 100 = 3.70%. Tax position (higher-rate taxpayer, £120,000 mortgage at 5%): Mortgage interest: £6,000/year. Section 24 restricts the deduction to a 20% credit. Taxable rental profit: £9,240 (before mortgage interest deduction is restricted). Income tax at 40%: £3,696. Less Section 24 credit: £1,200 (20% × £6,000). Net tax: £2,496. Net after-tax income: £9,240 − £2,496 = £6,744. Effective net-of-tax yield: £6,744 ÷ £250,000 = 2.70%.

Source: HMRC — Renting out your property, GOV.UK (gov.uk/renting-out-a-property). ONS UK House Price Index (gov.uk/government/collections/uk-house-price-index-reports).

Frequently asked questions

What is a good rental yield in the UK?

A gross yield of 5–8% is generally considered good in the UK. London typically yields 3–4% gross. Northern cities (Manchester, Liverpool) often achieve 6–9%. Net yield (after costs) is typically 1–2% below gross.

How do I calculate rental yield?

Gross yield = (Monthly Rent × 12) ÷ Property Value × 100. For a £1,200/month rent on a £250,000 property: (£14,400 ÷ £250,000) × 100 = 5.76%.

Does rental yield include mortgage payments?

No. Rental yield is calculated on property value, not equity. Mortgage payments affect your cash flow but are not deducted from yield calculations. Use rental yield to compare properties; use cash-on-cash return to measure your return on the deposit invested.

What costs should I include in net yield?

Letting agent fees, maintenance allowance (1–2% of property value per year), landlord insurance, service charges (flats), gas/electrical certificates, and an allowance for void periods (typically 4–6 weeks per year).

How does Section 24 affect buy-to-let profitability?

Section 24 (introduced from 2017, fully phased in by 2020) restricts mortgage interest relief to a 20% tax credit regardless of your income tax rate. A higher-rate taxpayer with a £150,000 mortgage at 5% pays tax on £7,500 of mortgage interest instead of deducting it — adding around £3,000 to their annual tax bill compared with the pre-2017 regime.

What is void period allowance and how much should I budget?

A void period is when the property is empty between tenancies. Most landlords experience 2–6 weeks of voids per year. A prudent allowance is one month's rent (8% of annual rental income). Properties in high-demand locations near universities or city centres tend to have shorter voids.

What is the difference between rental yield and cash-on-cash return?

Rental yield is calculated on the total property value. Cash-on-cash return is calculated on the actual cash invested (typically the deposit). A £250,000 property with a 25% deposit (£62,500) generating £6,000 net annual income has a gross yield of 2.4% on the full property value, but a cash-on-cash return of 9.6% on the deposit — a much more useful figure for comparing leveraged investment returns.

Do I need a buy-to-let mortgage for a rental property?

If you have a mortgage on the property, yes — you cannot let a property on a standard residential mortgage without your lender's consent. Letting without consent is a breach of your mortgage terms and could trigger early repayment demands. Buy-to-let mortgages are assessed on rental income (typically requiring rent to cover 125–145% of mortgage interest) rather than your personal income, though lenders also consider your overall financial position.

How much stamp duty do I pay on a buy-to-let property?

Buy-to-let and second home purchases attract a 5% surcharge on top of standard Stamp Duty Land Tax (SDLT) rates in England. On a £250,000 second property (2025-26), standard SDLT is £0 (the first £250,000 is 0%). Adding the 5% surcharge: 5% × £250,000 = £12,500. Compare this with a first-time buyer purchasing the same property, who pays £0 SDLT. The surcharge makes the yield calculation significantly different in the first year.

How does rental income affect my income tax bill?

Rental income is added to your other income and taxed at your marginal rate. If you earn £45,000 salary and receive £9,000 net rental profit, total income is £54,000 — pushing £3,730 into the higher rate (40%) band. The additional income tax on the rental profit would be approximately £2,200, compared to £1,800 if you were a basic-rate taxpayer throughout. Completing a Self Assessment return is compulsory once rental income exceeds £2,500/year after allowable expenses.

Related calculators

Stamp Duty CalculatorLTV CalculatorAffordability CalculatorROI CalculatorBuy-to-Let Mortgage Calculator

Your home may be repossessed if you do not keep up repayments on your mortgage.

Credibrate may receive a commission if you take out a product via one of our links. This does not affect the order in which products are shown or our editorial independence.