Quick answer
A gross rental yield of 5–7% is generally considered good for a UK buy-to-let property in 2025. Above 7% is strong. Below 4% makes the investment case very difficult unless you are banking on capital appreciation. But gross yield alone tells you almost nothing — net yield after all costs is the figure that actually determines whether an investment generates real income, and that is consistently 2–3 percentage points lower than the gross headline.
The question of what constitutes a good rental yield in the UK has become more nuanced since interest rates rose sharply from 2022. When BTL mortgage rates sat at 2–3%, a 5% gross yield left meaningful profit after costs. At today's rates of 4.5–5.5%, the same 5% gross yield can produce near-zero net return for a mortgaged landlord — or an outright cash loss after tax.
This means the threshold for a "good" rental yield has effectively risen in tandem with mortgage rates. The number that matters is not the gross yield a property website quotes — it is the net cash return after every cost has been deducted, benchmarked against both your mortgage rate and what you could earn from alternative investments with less hassle.
UK rental yield benchmarks at a glance
The four tiers below reflect broadly accepted benchmarks for UK buy-to-let in the current rate environment. These are gross yield figures — the starting point before costs are deducted.
Below 4%
Weak
Difficult to cover mortgage costs. Reliant on capital growth.
4–5%
Acceptable
Marginal with a mortgage. Viable unmortgaged in certain structures.
5–7%
Good
Positive cash flow possible for mortgaged landlords in the right structure.
7%+
Strong
Meaningful net return even after mortgage costs at current rates.
UK gross rental yield spectrum — 2025
Gross yield vs net yield — the difference that matters
Every property listing that quotes a yield figure is almost always quoting the gross yield. It is the easy number — annual rent divided by purchase price. But it is also the least useful number for a prospective landlord, because it ignores every single cost of ownership.
Gross rental yield
(Annual rent ÷ Property value) × 100
Quick and easy to calculate. Used by estate agents and property portals. Ignores mortgage interest, agent fees, maintenance, voids, insurance, and tax entirely.
Net rental yield
((Annual rent − Annual costs) ÷ Property value) × 100
The figure that tells you what you actually earn. Deducts all running costs before calculating the return. Typically 2–3 percentage points lower than gross yield.
What to include in "annual costs" for net yield
- Mortgage interest — the largest cost for most landlords. On a £180,000 interest-only BTL mortgage at 5.2%, that is £9,360/year.
- Letting agent fees — typically 8–15% of annual rent including VAT for a full management service.
- Maintenance and repairs — budget approximately 1% of property value per year. A £200,000 property should provision £2,000/year.
- Landlord insurance — buildings and contents cover for a rental property, typically £200–£500/year.
- Void periods — even a well-managed property will sit empty occasionally. Budget 3–4 weeks of lost rent per year as a minimum.
- Ground rent and service charges — applicable to leasehold flats. Can be £1,500–£4,000/year in some developments.
- Accountancy and compliance costs — self-assessment returns, electrical and gas safety certificates, EPC renewals.
A realistic total cost deduction of 35–45% of gross rent is appropriate for a mortgaged property with a letting agent. Use our rental yield calculator to run the gross figure, then apply this framework to estimate the net return.
How to calculate rental yield — the formula explained
The gross yield formula is straightforward. The worked examples below show how it is applied, and how quickly the net figure diverges from the headline number.
Gross rental yield formula
Gross yield = (Annual rent ÷ Property purchase price) × 100Example:
Annual rent = £900/month × 12 = £10,800
Property value = £200,000
Gross yield = (£10,800 ÷ £200,000) × 100 = 5.4%
Net rental yield formula
Net yield = ((Annual rent − Annual costs) ÷ Property purchase price) × 100Example:
Annual rent = £10,800
Annual costs = £4,800 (mortgage) + £1,080 (agent) + £2,000 (maint.) + £300 (insurance) + £450 (voids) = £8,630
Net yield = ((£10,800 − £8,630) ÷ £200,000) × 100 = 1.09%
That gap — 5.4% gross collapsing to 1.09% net — is not unusual for a mortgaged landlord in today's rate environment. It is the central reason why property investment decisions made on gross yield figures alone routinely disappoint.
Real yield calculations — three UK properties compared
Rental yield by UK region — where the numbers work in 2025
Location is the single biggest determinant of rental yield. The contrast between northern cities and southern England has widened as property prices have diverged while rental growth has been more evenly distributed. Apply the 35–45% cost deduction framework above to estimate net returns in each area.
North East England
7–10%
Est. net: 4–6%
Sunderland, Middlesbrough, Hull. Lowest purchase prices in England. High yield but lower capital growth expectations.
Liverpool
6.5–8.5%
Est. net: 3.5–5.5%
L6, L7, L8 strong for standard lets. HMO yields higher. Improving capital growth profile.
Manchester
6–8%
Est. net: 3–5%
High demand, strong fundamentals. City centre flats compressed by service charges. M40–M60 for best balance.
Leeds
5.5–7.5%
Est. net: 3–4.5%
Strong student and professional demand. LS2, LS6 well-established. Steady capital growth backdrop.
Sheffield
5.5–7%
Est. net: 3–4%
University cities generate consistent demand. S10, S11 reliable. Lower entry prices than Leeds or Manchester.
Birmingham
4.5–6.5%
Est. net: 2–4%
Variable by area. B15, B29 stronger. Central new-build apartments typically lower net yield.
Bristol
4–5.5%
Est. net: 1.5–3%
Higher purchase prices compress yield. BS5, BS13 among the better areas. Capital growth has been strong historically.
Outer London
4–5.5%
Est. net: 1–3%
Zones 4–6 better than inner London. Croydon, Romford, Ilford among higher-yield options.
Inner London
3–4.5%
Est. net: 0–2%
Very high purchase prices. Cash flow rarely positive with a mortgage. A capital growth play, not income.
Gross yields are approximate mid-2025 estimates. Net yield estimates assume a 75% LTV mortgaged landlord with a letting agent. Actual figures vary significantly by specific property and postcode.
Yield versus mortgage rate — the breakeven calculation
The most important number a mortgaged buy-to-let landlord can calculate is not their yield — it is how their yield compares to their mortgage rate after accounting for the portion of the property funded by debt.
| Gross yield | BTL rate | LTV | Cash flow before other costs | Verdict |
|---|---|---|---|---|
| 8.0% | 5.2% | 75% | Positive — approx. £2,300/year on £150k property | Strong margin |
| 6.5% | 5.2% | 75% | Positive — approx. £975/year on £150k property | Workable |
| 5.5% | 5.2% | 75% | Near breakeven before agent/maintenance | Marginal |
| 4.5% | 5.2% | 75% | Negative — cash loss before other costs | Not viable |
| 5.5% | 5.2% | 85% | Negative — higher debt amplifies the loss | Not viable |
Illustrative only. Based on interest-only BTL mortgage. Does not include agent fees, maintenance, insurance or tax.
The practical rule of thumb: your gross rental yield should comfortably exceed your BTL mortgage rate by at least 1.5–2 percentage points to leave room for costs. At a 5.2% mortgage rate, you need a gross yield of at least 6.7–7.2% to generate meaningful net cash flow. Properties yielding less than this are capital appreciation plays — not income investments — and should be evaluated on that basis.
Common mistakes when assessing rental yield
Using asking price rather than purchase price in the calculation
Gross yield looks better the lower the denominator. Some property portals calculate yield using the asking price — which is often higher than what you actually pay. Always use your actual agreed purchase price when calculating yield, and recalculate after any negotiation to see how the return changes.
Ignoring service charges on leasehold flats
A Manchester or London city centre flat with a 7% gross yield can quickly become a 2–3% net yield once annual service charges of £2,000–£4,000 are included. Service charges are non-negotiable, often rising annually, and are one of the most commonly overlooked costs in buy-to-let calculations. Always request the last three years' service charge accounts before purchasing a leasehold property.
Not factoring in the 5% stamp duty surcharge in the cost base
Stamp duty on a second property includes a 5% surcharge. On a £200,000 buy-to-let, that adds £10,000 to your effective cost base. Including this in your yield calculation — using total acquisition cost rather than just purchase price — gives a more accurate picture of your actual return on capital deployed.
Confusing gross yield with return on capital
Gross yield measures rental income against the full property value — not the capital you actually put in. If you purchased a £200,000 property with a £50,000 deposit, your return on capital deployed is calculated differently and will be either higher (if the investment cash flows positively) or much lower (if the mortgage is consuming most of the rent). Understand which metric you are calculating and what it is actually telling you.
Frequently asked questions
What is a good rental yield in the UK?
A gross yield of 5–7% is generally considered good in the current UK market. Above 7% is strong. The more useful benchmark, however, is net yield after all costs — which typically runs 2–3 percentage points below gross. A 7% gross yield might produce 4–5% net, which in high-yield northern cities represents a genuinely viable investment for a mortgaged landlord.
What is the difference between gross and net rental yield?
Gross yield is annual rent divided by property value — it ignores all costs. Net yield deducts mortgage interest, letting agent fees, maintenance, insurance, voids, and tax before calculating the return. Net yield is the only figure that reflects what you actually earn from the investment. The gap between gross and net is typically 2–3 percentage points for a mortgaged landlord with a letting agent.
How do you calculate rental yield in the UK?
Gross yield: (Annual rent ÷ Property value) × 100. A property worth £180,000 renting for £850/month generates £10,200 annual rent — a gross yield of 5.67%. For net yield, subtract all annual costs (mortgage interest, agent fees, maintenance, insurance, void allowance) from annual rent before dividing by property value.
Which UK cities have the highest rental yields in 2025?
The highest gross yields in 2025 are found in the North East (Sunderland, Middlesbrough — 7–10%), Liverpool (6.5–8.5%), and Manchester (6–8%). These cities combine relatively low purchase prices with strong rental demand. Leeds and Sheffield also perform well at 5.5–7.5%. London yields remain the lowest nationally at 3–5.5% depending on zone.
Is a 5% rental yield good in the UK?
A 5% gross yield is acceptable but tight in 2025. After deducting typical costs of 35–45% of gross rent, the net yield on a 5% gross property falls to roughly 2.75–3.25%. At current BTL mortgage rates of 4.5–5.5%, this leaves very little positive cash flow — or none — for a mortgaged landlord. A 5% yield is more compelling unmortgaged, or held in a limited company structure.
Related calculators and guides
DisclaimerThis article is for informational purposes only and does not constitute financial, tax, or investment advice. Rental yields, property values, and mortgage rates are illustrative and subject to change. Always consult a qualified financial adviser before making any property investment decision.
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