Rental Yield Calculator

A gross yield of 5–7% is generally considered good for UK buy-to-let. Northern cities (Manchester, Leeds, Liverpool, Glasgow) typically see higher yields of 6–9%. London and the South East tend to yield 3–5% gross due to high property prices. Net yield after costs and tax will be 1–3 percentage points lower than gross yield. Always calculate net yield before deciding whether a property stacks up.

Mortgage interest (the biggest cost for leveraged landlords), letting agent fees (8–15% of rent for full management), maintenance and repairs (budget 1% of property value per year), landlord insurance, ground rent and service charges (leasehold), safety certificates (gas, electrical, EPC), void periods when the property is empty, and income tax on rental profits. Section 24 restricts mortgage interest relief for higher-rate taxpayers — this calculator treats mortgage interest as a cost, but higher-rate landlords only get 20% tax credit on it, not full relief.

Since 2020, individual landlords cannot deduct mortgage interest as an expense. Instead, you get a 20% tax credit on mortgage interest costs. This means higher-rate (40%) taxpayers effectively pay tax on income used to service their mortgage. Many landlords have incorporated into limited companies to avoid this, as companies can still deduct mortgage interest as a business expense. This is a complex area — speak to a tax adviser before making decisions.

Ltd company ownership avoids Section 24 restrictions and pays corporation tax (19–25%) rather than income tax (up to 45%) on profits. However, there are costs: higher mortgage rates for company BTL mortgages, professional accountancy fees, and dividend tax when extracting profits. The break-even point is typically around 3–5 properties or when you are a higher-rate taxpayer with significant mortgage debt. Get personalised advice from a property tax specialist.