Rental yield is the annual rental income as a percentage of the property's purchase price. Gross yield uses income before costs; net yield deducts all expenses. In 2026, average gross yields range from 3.5–4.5% in prime London to 8–11% in northern cities. Net yield after mortgage interest, management, maintenance, insurance, and tax is typically 2–3 percentage points lower than gross.
Gross yield formula
Gross Yield = (Annual Rent ÷ Purchase Price) × 100. Example: £900/month rent (£10,800/year) on a £200,000 property = 5.4% gross yield. Use full acquisition cost (including SDLT and legal fees) as the denominator for a realistic figure.
Net yield formula
Net Yield = ((Annual Rent − Annual Costs) ÷ Purchase Price) × 100. Costs to deduct include mortgage interest, management fees (8–15%), insurance, safety certificates, maintenance (budget 1–2% of property value), void allowance (4–6 weeks/year), and accountancy. On the same £200,000 property, £5,200/year in costs gives a net yield of 2.8% vs 5.4% gross.
Section 24 impact on net yield
Since April 2020, landlords cannot deduct mortgage interest from rental income for income tax. Instead they receive a 20% tax credit. Higher-rate taxpayers pay 40% tax on income used to service the mortgage then reclaim 20% — a net 20% additional hit per pound of interest. On a heavily leveraged property this can turn a pre-tax profit into a post-tax loss. Limited company buy-to-let avoids Section 24 but adds other costs.
Regional benchmarks (2026)
- London prime zones 1–2: 3–4.5% gross
- Manchester, Birmingham, Bristol, Leeds: 5–7% gross
- Liverpool, Sheffield, Nottingham: 6–8.5% gross
- Sunderland, Middlesbrough, Hull: 8–12% gross
- HMO premium: typically 12–20% gross on comparable purchase prices