Enter your monthly rent and the current estimated value of the property to calculate gross rental yield. Add your annual costs to see net yield. All cost fields are optional. Leave out any that do not apply to your property.
How to use this tool
- Enter your monthly rent and the current estimated market value of the property.
- Add your annual costs in the optional fields: management fee, void period allowance, mortgage interest, maintenance, insurance, and any service charge or ground rent.
- Gross yield appears as soon as you enter rent and property value. Net yield updates as you add costs.
Understanding your results
Gross yield shows the return before costs. It is calculated as annual rent divided by property value, expressed as a percentage. Net yield shows what remains after deducting the costs you entered. A property with a gross yield of 6 per cent may have a net yield of 3 to 4 per cent once management fees, maintenance, and void periods are accounted for.
Both yield figures are before personal income tax. Section 24 of the Finance Act 2015 restricts mortgage interest relief for landlords paying income tax above the basic rate. If you pay tax at 40 or 45 per cent, your after-tax return will be lower than the net yield figure shown here. Use the Landlord Income Tax Calculator for a tax-adjusted view.
A void period allowance of 4 to 8 per cent is typical for a property that changes tenant once a year. Maintenance at 1 per cent of property value per year is a widely used rule of thumb for general upkeep. Use the current estimated market value for the most accurate yield comparison. If you want to calculate your return on original investment, use the purchase price instead.
For leasehold properties, include service charge and ground rent in the annual costs section. These can be significant costs and are often omitted from quick yield estimates.
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Legal context
Section 24 of the Finance Act 2015 restricts the deductibility of mortgage interest for landlords paying income tax at the higher or additional rate. From April 2020, mortgage interest is no longer an allowable expense against rental income. Instead, a 20 per cent basic rate tax credit applies to the full mortgage interest amount. For a landlord paying income tax at 40 per cent, this means the effective tax cost of mortgage interest is higher than before April 2020. Source: Finance Act 2015, Section 24; HMRC guidance on residential property income.
If you have a repayment mortgage, only the interest portion is an operating cost for yield purposes. The capital repayment portion builds equity and does not reduce rental profit. Your mortgage lender statement will show the interest and capital split. Entering your full repayment amount will give an inaccurate net yield figure.
Frequently asked questions
What is the difference between gross yield and net yield?
Gross yield is calculated as annual rent divided by property value, expressed as a percentage. It makes no deductions for costs. Net yield deducts running costs such as management fees, maintenance, insurance, and void allowances from the annual rent before dividing by property value. Net yield gives a more accurate picture of the actual return. A gross yield of 6 per cent on a property with significant costs can produce a net yield of 3 to 4 per cent.
What costs should I include when calculating net rental yield?
Include all recurring annual costs: letting agent management fee, maintenance and repairs, landlord insurance, ground rent and service charge for leaseholds, void period allowance, mortgage interest (not capital repayments), and any licensing fees such as HMO licensing. Do not include the mortgage capital repayment in the cost calculation as this builds equity rather than being a running cost.
What rental yield benchmarks indicate a good investment in the UK?
There is no single benchmark, but gross yields of 5 to 8 per cent are generally considered acceptable for buy-to-let in the UK. Yields above 8 per cent are common in northern cities such as Manchester, Liverpool, and Sheffield, where property values are lower relative to rents. Yields in London and the South East are typically lower, often 3 to 5 per cent gross, because property values are high relative to rental income.
Should I prioritise rental yield or capital growth when choosing a buy-to-let property?
The two often trade off against each other. Higher-yield areas tend to have lower capital growth. Lower-yield areas such as London have historically produced stronger capital appreciation. The right balance depends on your investment goals: if you need income now, higher yield is more important. If you are building long-term wealth and can service costs from other income, lower yield with stronger growth potential may suit better. Both carry risk and neither outcome is guaranteed.
Do HMO properties typically achieve higher yields than standard lets?
Yes. HMOs (houses in multiple occupation) generally produce gross yields of 8 to 12 per cent because individual rooms command a higher combined rent than the same property let as a single unit. However, HMOs carry higher management costs, mandatory licensing requirements under the Housing Act 2004, and more complex compliance obligations. Net yield after management costs and licensing fees is lower than the gross figure suggests.
How do mortgage lenders use rental yield when assessing buy-to-let applications?
Buy-to-let lenders use an interest coverage ratio (ICR) to assess affordability, not yield directly. The ICR requires that the monthly rent covers the mortgage interest at a stress-tested rate, typically 125 to 145 per cent of the mortgage payment. A property with a low yield relative to the purchase price may not pass the ICR test if the rent does not adequately cover the expected mortgage interest. Each lender sets its own ICR requirement.
Does Section 24 affect my net yield calculation?
Yes. Section 24 of the Finance (No. 2) Act 2015 restricts mortgage interest relief for individual landlords paying income tax above the basic rate. From April 2020, landlords cannot deduct mortgage interest from rental income before calculating tax. Instead, a 20 per cent tax credit applies. For a higher-rate taxpayer, this increases the effective tax cost of the mortgage and reduces after-tax net yield. The yield calculator shows pre-tax figures. Use the Landlord Income Tax Calculator for a tax-adjusted view.
How should I account for void periods in a rental yield calculation?
Include a void allowance as an annual cost in the net yield calculation. A standard approach is to assume one to two months’ vacancy per year, equivalent to 8 to 17 per cent of annual rent. For areas with high tenant demand, a 4 per cent allowance (around two to three weeks per year) is commonly used. Ignoring voids in the yield calculation overstates the return on a property that regularly takes time to re-let.
What yields do different regions of the UK typically achieve?
Gross yields vary significantly by region. Northern cities such as Sunderland, Middlesbrough, and Liverpool consistently show yields of 7 to 10 per cent or above. Midlands cities such as Nottingham and Birmingham typically produce 5 to 8 per cent. London and the commuter belt generally produce 3 to 5 per cent gross. These are averages across property types and yields change as house prices and rents move.
Should I use the purchase price or current market value to calculate yield?
Use current market value to compare your property’s yield against the market today. This shows the yield you would achieve if you bought the property now. Use the original purchase price to measure your return on the capital you invested. Both are valid for different purposes. Lenders typically use current market value when assessing whether a property meets their ICR requirements at refinance.