Gross rental yield = annual rent ÷ property value × 100. On a £250,000 property let at £1,250 a month, that's £15,000 ÷ £250,000 × 100 = 6%. That single number is the most-quoted figure in buy-to-let — but it's also the least useful one on its own, because it ignores costs, mortgage interest, and tax. This guide covers the full picture: gross yield, net yield, what's "good" in 2026, how UK cities compare, and how mortgage interest tax relief changes your real return.
📊What is rental yield?
Rental yield is the annual rental income from a property expressed as a percentage of its value. It tells you how hard your money is working as an income-producing asset — separate from any gain (or loss) in the property's value over time, which is called capital growth.
Landlords and investors use rental yield to compare properties, areas, and property types on a like-for-like basis. A £1m London flat and a £100,000 terrace in Sunderland might both rent for similar amounts relative to their price — yield is what lets you compare them fairly.
How to calculate gross rental yield
Gross rental yield = (annual rent ÷ property value) × 100
Gross yield = (Monthly rent × 12) ÷ Property value × 100
Step by step, for a property worth £220,000 let at £1,100 a month:
- Annual rent: £1,100 × 12 = £13,200
- Divide by property value: £13,200 ÷ £220,000 = 0.06
- Multiply by 100: 6% gross yield
Gross yield is quick and useful for first-pass comparisons, but it tells you nothing about how much of that rent you actually keep.
How to calculate net rental yield
Net rental yield = ((annual rent − annual costs) ÷ property value) × 100
Net yield = (Annual rent − Annual costs) ÷ Property value × 100
Costs to subtract before dividing typically include:
- Letting agent fees (usually 10-15% of rent if fully managed)
- Landlord insurance (buildings, contents, rent guarantee)
- Maintenance and repairs (often estimated at 10-15% of rent)
- Ground rent and service charges (leasehold flats)
- Void periods (weeks the property sits empty between tenants)
Net yield does not deduct mortgage interest or capital repayments — those are accounted for separately, covered below.
Gross vs net rental yield: a worked example
Take a £250,000 property let at £1,250 a month (£15,000 a year). Here's how the same property looks at each stage:
| Step | Amount |
|---|---|
| Annual rent | £15,000 |
| Letting agent fees (12%) | −£1,800 |
| Landlord insurance | −£300 |
| Maintenance (10%) | −£1,500 |
| Ground rent & service charge | −£600 |
| Total annual costs | £4,200 |
| Net annual income | £10,800 |
Gross yield: £15,000 ÷ £250,000 × 100 = 6.0%
Net yield: £10,800 ÷ £250,000 × 100 = 4.3%
That's a 1.7 percentage point gap between the headline number and the realistic one — on a £250,000 property, that's the difference between £15,000 and £10,800 a year before tax.
Always use the same property value for gross and net yield — either the purchase price or the current market value, but be consistent. Mixing the two makes yields incomparable across properties.
What is a good rental yield in the UK?
| Yield band | Rating | Typical areas |
|---|---|---|
| Below 4% | Low | Central London, Oxford, Cambridge, Bath |
| 4-6% | Average / solid | Most of England outside London, Birmingham, Bristol |
| 6-8% | Good | Manchester, Glasgow, Liverpool, Leeds |
| 8%+ | Excellent | Sunderland, Newcastle, Aberdeen, Burnley, Middlesbrough |
The UK average gross rental yield is currently around 5.8%, based on an average buy-to-let property price of roughly £270,000 and average rent of around £1,300 a month. As a rule of thumb, anything above the UK average on a gross basis — and above 5% net — is generally considered a strong income-producing investment.
📊Average rental yields by UK city/region (2026)
Yield varies enormously by location, mainly because property prices and rents don't move in lockstep. Cheaper cities with strong rental demand tend to produce the highest yields, while expensive cities with slower rent growth produce the lowest.
| City / Region | Approx. gross yield (2026) |
|---|---|
| Sunderland | 9-11% |
| Middlesbrough | 9.5-12% |
| Newcastle | ~9.7% |
| Leeds | ~9.6% |
| Nottingham | ~9.0% |
| Aberdeen | 8%+ |
| Burnley | 8%+ |
| Liverpool | ~7-8% |
| Glasgow | ~7-8% |
| Manchester | ~6-7% |
| UK average | ~5.8% |
| Birmingham / Bristol | ~5-6% |
| Cambridge / Oxford | ~3-4% |
| Central London | ~2-4% |
High-yield areas often come with higher tenant turnover, longer void periods between tenancies, and higher maintenance costs on older housing stock — all of which hit your net yield harder than your gross yield. A 9% gross yield city doesn't automatically mean a 9% net return.
How mortgage interest tax relief affects your real yield
This is the part most yield guides skip — and it matters for almost every UK landlord with a mortgage.
Since April 2020, landlords who own buy-to-let property as individuals (not through a limited company) can no longer deduct mortgage interest from their rental income before calculating tax. Instead, under Section 24 of the Finance Act, they receive a flat 20% tax credit on mortgage interest paid, regardless of their income tax band.
This creates a gap between your net yield (after running costs) and your net yield after tax (what you actually keep):
- Basic-rate (20%) taxpayers are largely unaffected — the 20% credit broadly matches the tax they'd pay on that income.
- Higher-rate (40%) and additional-rate (45%) taxpayers lose out significantly, because they're taxed at 40-45% on the full rental profit (including the portion that goes straight to mortgage interest), but only get 20% of it back as a credit.
Worked example: higher-rate taxpayer
Continuing the £250,000 property example (£10,800 net income, mortgage interest of £6,000 a year):
| Amount | |
|---|---|
| Net rental income (after costs) | £10,800 |
| Mortgage interest | £6,000 |
| Taxable rental profit (Section 24: interest added back) | £10,800 |
| Income tax at 40% | −£4,320 |
| Less: 20% tax credit on £6,000 interest | +£1,200 |
| Tax due | £3,120 |
| Cash left after interest and tax | £10,800 − £6,000 − £3,120 = £1,680 |
Net yield after tax: £1,680 ÷ £250,000 × 100 = 0.7%
That's the real number for a highly-geared, higher-rate-taxpayer landlord — a long way from the 6% gross figure that first appears on a listing. The gap shrinks significantly with a smaller mortgage, a basic-rate tax position, or property held through a limited company (where mortgage interest remains fully deductible against corporation tax).
Gross vs net vs after-tax yield: side by side
For the same £250,000 property at £1,250/month rent, with £6,000/year mortgage interest and a higher-rate taxpayer:
| Yield type | Annual income | Yield |
|---|---|---|
| Gross yield | £15,000 | 6.0% |
| Net yield (after running costs) | £10,800 | 4.3% |
| Net yield after tax (higher-rate, geared) | £1,680 | 0.7% |
The bigger the mortgage and the higher your tax band, the further the after-tax figure falls below the headline gross yield.
Common mistakes when calculating rental yield
- Using the asking price instead of what you'd actually pay — yield calculations should reflect your real purchase price including any negotiated discount.
- Forgetting void periods — even one month empty per year reduces annual rent by roughly 8%, which flows straight through to yield.
- Ignoring service charges and ground rent on leasehold flats — these can be £1,000-£3,000+ a year and significantly affect net yield.
- Comparing gross yield in one area to net yield in another — always compare like for like.
- Treating gross yield as your "return" — it's a useful screening metric, but it isn't what lands in your bank account.
Use the rental yield calculator
The fastest way to get an accurate picture is to enter your own numbers — property value, monthly rent, and annual costs — and see gross and net yield calculated instantly.
📊Frequently asked questions
What is a good rental yield in the UK?
A gross rental yield of 5-8% is generally considered good for UK buy-to-let. Below 4% is low (common in London and the South East), 5-6% is solid, and above 7% is strong — typically found in northern cities such as Sunderland, Newcastle, and Liverpool. Always check net yield too, since a high gross yield with high running costs can deliver a poor net return.
What is the difference between gross and net rental yield?
Gross rental yield is annual rent divided by property value, before any costs. Net rental yield subtracts annual running costs — letting agent fees, insurance, maintenance, ground rent and service charges, and void periods — before dividing by property value. Net yield is always lower than gross and gives a more realistic picture of your actual return.
How do I calculate rental yield on a buy-to-let property?
Divide the annual rent by the property's value (purchase price or current market value), then multiply by 100. For example, a property worth £250,000 let at £1,250 a month earns £15,000 a year, giving a gross yield of 6%. For net yield, subtract your annual costs from the rent first.
Is rental yield the same as ROI?
No. Rental yield measures income return only — rent as a percentage of property value. Return on investment (ROI) typically includes both rental income and capital growth (or loss), and is often calculated against the cash you've actually invested (deposit plus costs) rather than the full property value, especially if you have a mortgage.
Does rental yield include mortgage payments?
Gross and net yield, as commonly calculated, do not deduct mortgage payments — net yield covers running costs like insurance, management fees, and maintenance, but not mortgage interest or capital repayments. To see your real cash return after mortgage interest tax relief, you need to look at net yield after tax, which factors in the 20% tax credit on mortgage interest under Section 24.
What counts as a good rental yield for a beginner landlord?
For a first buy-to-let, aim for a net yield of at least 5-6% after realistic costs — agent fees, insurance, maintenance, and void periods. A high gross yield (8%+) in a cheaper northern city can look attractive, but check tenant demand, void period risk, and maintenance costs before assuming the gross figure will hold up as net.
Last updated June 2026. Yield benchmarks based on 2026 UK market data and HMRC Section 24 mortgage interest relief rules.