Buy-to-Let Yield Calculator

Buy-to-let yield measures the return on your property investment, and there are three numbers worth knowing rather than one. Gross yield is the annual rent divided by the property price, so £1,000 a month on a £200k property is 6%. Net yield subtracts the running costs: letting agent fees at 10-15%, maintenance at around 1% of the property value a year, insurance, void periods and the certifications a landlord has to keep current, covering gas, electrical, EPC and EICR. It leaves out mortgage interest, which depends on how you finance the purchase rather than on the property itself. The same property might show a net yield of 3-4%, which is why gross always flatters.

Return on investment measures the cash return on the capital you have actually put in, meaning your deposit and purchase costs rather than the property price. This calculator shows gross and net yield on the property first, then the effect of borrowing: cash flow after interest on an interest-only mortgage, and the return on cash invested, which divides that cash flow by your deposit, Stamp Duty and the purchase fees you enter. Stamp Duty uses the additional-property rates unless you untick that box, so at the default £250,000 price it is £15,000. All figures are before tax, so add any capital growth separately.

Since April 2020, landlords have not been able to deduct mortgage interest from rental income. A 20% tax credit is given on the interest paid instead, which means higher and additional-rate landlords pay considerably more tax than under the old rules. Agent fees, insurance and repairs are still deducted as before. The calculator works before tax, so to estimate the bill, tax its net operating income, the rent after voids less running costs but before mortgage interest, at your rate and take off 20% of the interest. The arithmetic is stark. A higher-rate landlord with £8k of rent and £3k of mortgage interest was once taxed on £5k, a bill of £2k at 40%. Now the whole £8k is taxable, producing £3.2k of tax less a £600 credit, so £2.6k, an effective increase of 30%. Those are the 2026/27 rates. From 6 April 2027 landlords outside Scotland will pay separate property income rates of 22%, 42% and 47%, and the credit for finance costs will be given at 22% (Budget 2025).

Limited company structures sidestep the problem, since a special purpose vehicle pays Corporation Tax at 19% on profits up to £50,000 and 25% above £250,000, with marginal relief in between, and can still deduct its interest in full, which is why so many landlords have moved that way. Location counts for as much as structure. London runs at 4-5% gross and is bought largely for capital growth, the South East at 5-6%, Manchester, Birmingham and Leeds at 6-8%, and Liverpool, Sunderland and Bradford at 8-10% or more.

The catch is that high-yield areas often come with weaker capital growth and more management work, including lower-quality tenancies and longer voids, so a big headline percentage is never free money. Many investors set a double target: a net yield above 5% together with realistic capital growth of 3-5% a year, which produces a total return of about 8%, roughly what equity markets deliver. Judging a deal on gross yield alone is how landlords end up disappointed two years in.

Gearing is what makes buy-to-let attractive, and it deserves to be understood in both directions. A £200k property at 4% net yield produces £8k of profit, and appreciating at 4% a year adds £8k of capital gain, a total return of £16k, or 8% on £200k with no borrowing at all. Buy the same property at 75% LTV with a £50k deposit and 5.5% interest on the £150k loan, £8,250 a year, and the income falls to about break-even at −£250. The £8k of capital growth still belongs to you, giving £7,750 on £50k, a 15.5% return on equity before tax and purchase costs. The mechanism reverses on the way down, where a 4% fall in prices becomes an £8,250 loss, 16.5% of that equity.