— 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

1 · Property & Purchase
Purchase Price£
£
Depositmin 25% for BTL
%
2 · Rental Income
Monthly Gross Rent£/month
£
Void Allowanceweeks/year empty
wk
3 · Mortgage
Mortgage RateBTL avg ~4.5–5.5%
%
Mortgage Termyears
yr
Interest-only mortgage
Most BTL mortgages are interest-only
4 · Annual Running Costs
Letting Agent Fee% of rent, full management
%
Maintenance Reserve% of annual rent
%
Landlord Insurance£/year
£
Other Annual Costssafety certs, ground rent…
£
5 · 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%.
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.
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.
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. Experienced UK investors typically target 10–15%+ CoC ROI.
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. Source: Finance Act 2015 (Section 24).
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.
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.
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.

01 — 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%.

02 — NET YIELD
After running costs

Net yield deducts letting agent fees, maintenance reserve, insurance, and void allowance before dividing by purchase price. This is the true income return before mortgage and tax. Typical UK net yields run 2–3 percentage points below gross.

03 — 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. Most experienced UK investors target a minimum of 10–15%.

04 — 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. Failing this test means no mortgage — regardless of your personal income.

05 — 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. For 40% taxpayers this means paying tax on income that went to the mortgage. A limited company avoids Section 24 entirely — toggle the switch above to compare both scenarios.

06 — 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 purchase costs. This calculator computes the full banded SDLT automatically and includes it in your total cash invested figure.

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.
How does Section 24 affect my tax bill?
Section 24 means 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.
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.
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).
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. 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. This is one of the most common reasons BTL applications fail.
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. Always consult a qualified accountant and mortgage broker before investing.