— Free UK Property Tool —

Buy-to-Let Rental Yield Calculator

Full BTL analysis in one place — gross yield, net yield, monthly cashflow, cash-on-cash ROI, Section 24 tax impact, and ICR lender stress test. Updated for 2026 SDLT rates.

Gross & Net Yield Section 24 Impact ICR Stress Test Monthly Cashflow Cash-on-Cash ROI Ltd Co vs Personal
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Your Property Details

Property & Purchase
Purchase Price£
£
Depositmin 25% for BTL
%
Rental Income
Monthly Gross Rent£/month
£
Void Allowanceweeks/year empty
wk
Mortgage
Mortgage RateBTL avg ~4.5–5.5%
%
Mortgage Termyears
yr
Interest-only mortgage
Most BTL mortgages are interest-only
Annual Running Costs
Letting Agent Fee% of rent, full management
%
Maintenance Reserve% of annual rent
%
Landlord Insurance£/year
£
Other Annual Costssafety certs, ground rent…
£
Tax
Income Tax Band
Owned via limited company
19% corp tax — avoids Section 24
↓ Methodology ↓
How this calculator works — formulas & sources
Gross Rental Yield
Gross Yield = (Monthly Rent × 12) ÷ Purchase Price × 100%
Quick screening metric before expenses. A good gross yield in the UK is 5–8%. Northern cities (Liverpool, Manchester, Nottingham) frequently hit 7–10%. London typically sits at 3–4%. An HMO on the same property can often add 2–4 percentage points of gross yield through room-by-room letting. HMO vs BTL
Net Rental Yield
Net Yield = (Annual Rent − Annual Expenses) ÷ Purchase Price × 100%
Annual Expenses = Agent Fees + Maintenance + Insurance + Other Costs
Void allowance reduces effective annual rent before expenses are deducted. Net yield typically runs 2–3 percentage points below gross in the UK. Use the rent vs buy calculator to compare net yield against the cost of renting equivalent accommodation yourself. Rent vs Buy explained
Monthly Cashflow
Monthly Cashflow = (Net Annual Rent − Tax Liability − Annual Mortgage Cost) ÷ 12
Interest-Only: Annual Mortgage = Loan × Rate
Repayment: Monthly = L × [r(1+r)ⁿ] / [(1+r)ⁿ − 1]
Cashflow after mortgage and tax. Negative cashflow is common in London — investors rely on capital appreciation. Northern cities more frequently generate positive cashflow. If negative cashflow is a concern, the rent vs buy calculator can show whether holding the property still beats renting. Rent vs Buy explained
Cash-on-Cash ROI
CoC ROI = Annual Net Cashflow ÷ Total Cash Invested × 100%
Total Cash Invested = Deposit + SDLT + Legal Fees + Survey
SDLT is calculated using the full banded formula with the 5% additional property surcharge (from October 2024) across all bands. On a flip, SDLT is one of the largest costs eating into profit margin. Experienced UK investors typically target 10–15%+ CoC ROI on a BTL hold. Stamp Duty (SDLT) Explained · HMO vs BTL
Section 24 Tax (Individual Landlords)
Taxable Income = Gross Rent (mortgage interest NOT deductible)
Tax = Taxable Income × Tax Rate
Tax Credit = Mortgage Interest × 20%
Net Tax = Tax − Tax Credit
Since April 2020, individual landlords receive only a 20% tax credit on mortgage interest — they cannot deduct it as a business expense. For 40% taxpayers this means paying 20% extra tax on every pound of mortgage interest. Use the Section 24 calculator to model your exact liability. Source: Finance Act 2015 — Section 24 explained.
Limited Company Tax
Taxable Profit = Gross Rent − All Expenses − Mortgage Interest
Corporation Tax = Taxable Profit × 19%
(25% for profits above £250,000)
Limited companies are fully exempt from Section 24 — mortgage interest is deductible in full. Corporation tax rate: 19% for profits up to £50,000; marginal relief between £50–250k; 25% above £250k. Source: Corporation Tax Act 2010. Section 24 explained
ICR Stress Test
ICR = Annual Rent ÷ Annual Mortgage Interest
Required: ≥125% for basic-rate taxpayers
Required: ≥145% for higher-rate taxpayers
Stress Rate = max(Pay Rate + 2%, 5.5%)
Lenders stress-test BTL applications at the higher of the pay rate + 2% or 5.5% (PRA SS13/16). This calculator shows the ICR at your input rate. A failing ICR means the mortgage will be declined regardless of personal income. Converting to an HMO can dramatically improve ICR by increasing rental income from the same property. HMO vs BTL
Sources: Finance Act 2015 §24 (Section 24) · PRA SS13/16 (ICR stress test) · HMRC SDLT guidance (October 2024 rates) · Corporation Tax Act 2010 · RICS survey guidelines
Last reviewed: April 2026

Results

⬤ Calculating…
Gross Yield
—
before expenses
Net Yield
—
after running costs
Monthly Cashflow
—
after mortgage & tax
Cash-on-Cash ROI
—
return on deposit
Annual Tax Liability (est.)
—
—
ICR Stress Test —
0% 125% 145% 200%+
Lenders require rent to cover 125–145% of mortgage interest
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How it works

Six metrics that tell you the full story

A headline yield figure hides the reality of buy-to-let. Here's what each metric means and why it changes your decision.

GROSS YIELD
The headline number

Gross yield is the starting point — useful for comparing properties quickly, but misleading on its own because it ignores all costs. A "good" gross yield in the UK is 5–8%. Northern cities (Liverpool, Nottingham, Sheffield) often hit 7–10%. London sits at 3–4%. Running an HMO instead of a standard BTL can push gross yield significantly higher at the same purchase price. HMO vs BTL

SDLT SURCHARGE
The extra stamp duty

Since October 2024, all buy-to-let and second-home purchases carry a 5% SDLT surcharge on top of standard rates across every band. On a £300,000 BTL this adds £15,000 to your purchase costs — which this calculator includes automatically in your cash-on-cash ROI. Considering an HMO instead? The same SDLT applies, but higher rents can absorb the upfront cost faster. Stamp Duty (SDLT) Explained · HMO vs BTL

CASH-ON-CASH ROI
Return on your deposit

This measures how efficiently your actual cash (deposit plus purchase costs including SDLT) generates returns. A property with a modest gross yield can deliver strong CoC ROI through leverage — though SDLT and purchase costs reduce this significantly. On a flip the same CoC logic applies but the time horizon is months, not years. Most experienced UK investors target a minimum of 10–15% on a BTL. Stamp Duty (SDLT) Explained · HMO vs BTL

ICR STRESS TEST
The lender's test

The Interest Coverage Ratio determines whether you can get a mortgage. Most lenders require rent to cover 125% of mortgage interest for basic-rate taxpayers, or 145% for higher-rate taxpayers. Higher-rate taxpayers face the tighter threshold partly because Section 24 increases their effective tax burden on rental income. Failing the ICR test means no mortgage, regardless of personal income. Section 24 explained · HMO vs BTL

SECTION 24
The landlord tax trap

Since April 2020, individual landlords cannot deduct mortgage interest from rental income. Instead you receive a 20% basic-rate tax credit on finance costs. For 40% taxpayers this means paying tax on income that went to the mortgage. Use the Section 24 calculator to model your exact extra tax cost, or toggle the Ltd Co switch above to compare both structures. If the tax burden makes standard buy-to-let unviable, an HMO structure can generate enough extra income to absorb it. Section 24 explained in full · HMO vs BTL

NET YIELD
After running costs

Net yield deducts letting agent fees, maintenance reserve, insurance, and void allowance before dividing by purchase price — remember SDLT and legal fees are part of that denominator too. This is the true income return before mortgage and tax. Typical UK net yields run 2–3 percentage points below gross. If you're weighing up renting instead, the rent vs buy calculator models the full comparison. Stamp Duty (SDLT) Explained · Rent vs Buy explained

FAQ

Common questions

What is a good rental yield in the UK in 2026?
A good gross rental yield is typically 5–8%. Northern cities like Liverpool, Manchester, Nottingham and Sheffield frequently achieve 7–10% gross yield. London typically sits at 3–4%, with investors relying more on capital appreciation. For net yield (after all running costs), target 3–5%. Anything below 3% net is marginal after mortgage and tax. HMO properties often deliver higher yields than standard BTL at the same price point — see HMO vs BTL for a full comparison.
How does Section 24 affect my tax bill?
The Section 24 rules mean individual landlords cannot deduct mortgage interest as a business expense. Instead you receive a 20% basic-rate tax credit on the interest amount. For a 40% taxpayer this effectively means paying 20% extra tax on your mortgage interest — you pay tax on income that went to the bank. This calculator models this precisely. Toggle "Limited company" to see how incorporation changes the picture. Section 24 explained in full
Should I buy through a limited company to avoid Section 24?
Limited companies pay 19% corporation tax and are exempt from Section 24 — mortgage interest is fully deductible. However, BTL mortgages through companies carry a rate premium of 0.5–1.0%, additional accounting costs (£800–2,000/year), and dividend tax applies when you extract profits. The break-even point varies but incorporation typically makes sense for higher-rate taxpayers with significant mortgage debt. Use the Ltd Co toggle above to compare your specific numbers. If you're buying to renovate and sell rather than hold, the flip profit calculator is a better starting point. Section 24 explained in full
What is the SDLT rate for buy-to-let in 2026?
From October 2024, additional residential properties (all BTL purchases) carry a 5% surcharge on top of standard SDLT rates across every band. The effective banded rates are: 5% on 0–£125k, 7% on £125–250k, 10% on £250–925k, 15% on £925k–1.5m, 17% above £1.5m. This calculator applies the full banded formula automatically. Note: Different rates apply in Scotland (LBTT) and Wales (LTT). If the SDLT cost makes BTL unviable, the rent vs buy calculator can help you model the numbers — or read Stamp Duty (SDLT) Explained and Rent vs Buy explained for the full breakdown.
What is the ICR and why does my lender care about it?
The Interest Coverage Ratio (ICR) is your annual rent divided by your annual mortgage interest. Most BTL lenders require a minimum ICR of 125% for basic-rate taxpayers and 145% for higher-rate taxpayers — the higher threshold for higher-rate payers reflects the Section 24 tax burden they carry. If your rent doesn't cover this threshold, most high-street lenders will decline the mortgage — it doesn't matter how much you earn personally. Running an HMO can push rents high enough to pass ICR where a standard BTL fails. Section 24 explained · HMO vs BTL
How accurate is this calculator?
This calculator uses current 2026 SDLT rates, Section 24 rules as of April 2026, and UK BTL expense benchmarks. All results are estimates for guidance only. Actual tax liability depends on your complete tax position including other income sources, allowances, and reliefs not modelled here. Mortgage availability depends on lender-specific criteria. For a deeper understanding of how each metric works, see Stamp Duty (SDLT) Explained, Section 24 explained and HMO vs BTL.