About this calculator
This rental yield calculator separates the figures landlords often blur together: gross yield, net property yield, mortgage cash flow, cash-on-cash return and estimated tax.
Start with price and rent for gross yield, then add a mortgage, running costs and tax if you want more.
How the calculation works
Gross annual rent = monthly rent × 12. Gross yield = gross annual rent ÷ price.
Effective rent = gross rent − void allowance. Net operating income (NOI) = effective rent − running costs. Net property yield = NOI ÷ price.
Mortgage cash flow = NOI − the full mortgage payment. Cash-on-cash return = pre-tax cash flow ÷ cash invested.
Mortgage capital repayment reduces your cash flow but it isn't an expense — it becomes equity.
Worked examples
Rental yield on a £250,000 property (cash purchase)
£1,250/month rent: gross yield 6%, net yield 4.5% with typical costs.
Interest-only buy-to-let at 75% LTV
5% interest-only on £187,500 costs £9,375 a year, leaving £157/month pre-tax cash flow.
Repayment buy-to-let
Payments rise to £13,153 a year; cash flow falls to -£158/month, but £3,866 of first-year equity is built.
Individual higher-rate landlord
On the interest-only example: tax on £11,258 profit at 40% is £4,503, reduced by a 20% credit on interest (£1,875) = £2,628.
Limited company landlord
Interest is deductible: profit £1,883, Corporation Tax about £358. That's cash kept in the company before any personal tax on extraction.
Gross vs net rental yield
Gross yield ignores costs; net yield deducts voids and running costs but not the mortgage. Use net yield to compare properties, and cash flow to judge your own finances.
Section 24 and residential mortgage interest
Individual landlords of residential property can't deduct mortgage interest from rental profit. Instead they get a tax reduction at the basic rate (20%) of finance costs, limited by profits. Higher-rate taxpayers therefore pay more than a simple 'profit after interest × rate' approach suggests.
Rental yield through a limited company
Companies deduct interest in full and pay Corporation Tax: 19% on profits up to £50,000, 25% above £250,000, with marginal relief in between. Thresholds shrink if there are associated companies. Cash retained in the company is taxed again when extracted.
What is a good rental yield?
There's no single answer. Yields vary by region and property type, and a higher yield often comes with higher costs or risk. Compare net yield and cash flow, not just gross yield.
What changes the result?
- Purchase price and rent.
- Mortgage rate, LTV and type.
- Voids and running costs.
- Ownership structure and tax band.
Common mistakes
- Quoting gross yield as if it were profit.
- Treating capital repayment as a cost — or as profit.
- Deducting all mortgage interest for a personally owned residential let.
- Calling company cash 'take-home'.
Frequently asked questions
Is the mortgage included in rental yield?
No. Yield measures the property; cash flow measures your finances after the mortgage.
Should I use gross or net yield?
Net yield is more useful for comparing properties because it includes running costs.
Does mortgage capital repayment count as profit?
No — and it isn't an expense either. It's cash becoming equity.
How does Corporation Tax affect rental profit?
Company profit after interest is taxed at 19–25%, with marginal relief between £50,000 and £250,000.
Is cash flow the same as yield?
No. Cash flow is money left after all payments; yield is a percentage of the price.
What about 2027/28?
Separate property income rates are due from April 2027. We'll add them once checked against final legislation.