Gross rental yield is the annual rent divided by the property price, × 100. £1,000 a month on a £200,000 property is £12,000 ÷ £200,000 = 6%. Net yield takes off voids and running costs first. Individual landlords cannot deduct mortgage interest from rental profit; under Section 24 they get a tax reduction of 20% of it instead, so higher-rate taxpayers can pay tax on more than they make.
Calculator
Property, rent and costs
How it works
Gross yield = rent for a full year ÷ purchase price × 100. Net yield = (rent actually collected − running costs) ÷ price × 100, before mortgage payments. Cashflow = rent collected − running costs − mortgage payments. Cash-on-cash return = cashflow ÷ the cash you put in (deposit plus buying costs).
Section 24. For individual landlords and partnerships with residential property, mortgage interest and other finance costs are not deducted from rental profit. Instead, GOV.UK says the tax is reduced by the basic rate (20%) of the lowest of: finance costs (plus any brought forward), property profits, and adjusted total income above the personal allowance. Any finance costs not used are carried forward. Companies are not affected.
Worked example (2026-27, higher-rate taxpayer). A £200,000 flat lets for £1,000 a month with 2 empty weeks: £11,538.46 collected. Agent fees (10%) and £900 of other costs leave £9,484.62, a 6% gross and 4.74% net yield. An interest-only mortgage of £150,000 at 5% costs £7,500, so cashflow before tax is £1,984.62 a year. Tax: 40% of £9,484.62 = £3,793.85, minus the 20% credit on £7,500 (£1,500) = £2,293.85. After tax the property loses £309.23 a year. If interest were fully deductible, the tax would have been £793.85.
From April 2027. Finance Act 2026 sets separate property income rates of 22%, 42% and 47% for 2027-28 in England, Wales and Northern Ireland, and the HMRC technical note says finance cost relief will be given at the property basic rate (22%). At Budget 2026 on 28 October 2026 the government announced that Finance Bill 2026-27 will set 24%, 44% and 49% instead; the calculator assumes the credit would then follow the 24% property basic rate. Pick either in the calculator; neither changes the yield, only the tax.
Comparing more than one deal? The UK Property Deal Analyser (£17.99, Excel and Google Sheets) adds break-even rent and interest rate, lender stress tests and after-tax results for individuals or a company. To keep the year's records for your tax return, use the UK Landlord Income & Expense Tracker (£16.99). The UK Landlord Toolkit (£39.99) bundles the Deal Analyser with compliance, rent arrears and short-let tools.
Frequently asked questions
How do you calculate rental yield in the UK?
Gross yield is the annual rent ÷ the property price × 100. Net yield subtracts voids and running costs (agent fees, insurance, repairs, service charge) from the rent first. Neither includes mortgage payments; cashflow and cash-on-cash return do.
What is a good rental yield?
There is no official figure. It depends on the area, the property, your financing and how much risk and work you accept. Compare net yield and after-tax cashflow, not just gross yield.
What is Section 24?
The rules (brought in by section 24 of Finance (No. 2) Act 2015) that stop individual landlords deducting residential mortgage interest and other finance costs from rental profit. Since 6 April 2020 they get a tax reduction at the basic rate of 20% instead.
How is the Section 24 tax credit worked out?
20% of the lowest of: finance costs for the year plus any brought forward, property profits, and adjusted total income above the personal allowance. It cannot create a refund, and unused finance costs carry forward to the next year.
Does Section 24 affect limited companies?
No. GOV.UK says UK and non-UK resident companies are not affected and still get relief for interest and finance costs in the usual way. Whether a company suits you is a question for an accountant.
Can I deduct my whole mortgage payment?
No. Only the interest (and costs of getting the loan) is a finance cost. Capital repayments are not deductible at all.
What changes for landlords in April 2027?
Property income gets its own tax rates from 2027-28 in England, Wales and Northern Ireland: 22%, 42% and 47% under Finance Act 2026, with finance cost relief at the 22% property basic rate according to the HMRC technical note. Budget 2026 announced these will rise to 24%, 44% and 49%, subject to legislation in Finance Bill 2026-27.
More free tools
Related guides: MTD quarterly updates for landlords.
Sources
- Changes to tax relief for residential landlords: how it's worked out – GOV.UK
- Restricting finance cost relief for individual landlords – GOV.UK
- Income Tax when you rent out a property: working out your rental income – GOV.UK
- Finance Act 2026, section 7 (property income rates for 2027-28) – legislation.gov.uk
- Change to tax rates for property, savings and dividend income: technical note – GOV.UK
- Income Tax: changes to tax rates for property and savings income (Budget 2026) – GOV.UK
Last checked: November 2026. Rates shown are for England, Wales and Northern Ireland; Scotland sets its own bands and rates. This tool gives general information, not legal, tax or financial advice. Figures are estimates based on what you enter and the rules in the sources above; rules change, so check the sources or take professional advice before relying on a result. Made by PHK MEDIA LTD.