Rental Yield (Gross / Net)
Quick answer
The annual return on a rental property as a percentage of its value. Gross yield is annual rent ÷ property price × 100; net yield subtracts running costs (management, insurance, maintenance, a void allowance, ground rent/service charge) before dividing. Neither is the real return until you also take off mortgage interest and tax — after Section 24 and Making Tax Digital, the after-tax yield is what actually matters.
At a glance
- Gross yield
- Annual rent ÷ price × 100
- Net yield
- Gross minus running costs
- Missing piece
- Mortgage interest + tax (Section 24)
- Use
- Compare deals; not a cash-return figure
Full guide
Read the complete landlord guide on Rental Yield (Gross / Net)
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Open full guideWhy Rental Yield (Gross / Net) matters for landlords
The gross-yield headline agents quote is close to meaningless for a decision, because it ignores every cost that actually eats the return — a "7% gross" flat can be a 2% after-tax reality once management, voids, mortgage interest and the Section 24 credit are applied. The gap between gross and after-tax yield is exactly where over-leveraged landlords get caught, so the figure to underwrite a purchase on is after-tax net, not the advert’s gross. Model it before you offer, not after you complete.
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Related terms
Allowable Expenses
The day-to-day running costs a landlord can deduct from rental income before tax. They must be wholly and exclusively for the letting — letting agent fees, repairs and maintenance (not improvements), landlord insurance, ground rent and service charges, accountancy, and utility or council tax you pay. Mortgage interest is handled separately as a 20% tax credit under Section 24, not as an expense.
Capital Expenditure vs Revenue Expenditure
The line that decides whether a cost reduces your rental profit now or your Capital Gains Tax later. Revenue expenditure (repairs, maintenance, replacing like-for-like) is deducted from rental income in the year you spend it. Capital expenditure (improvements, extensions, first-time installation of something new) is added to the property’s cost base and only counts against CGT when you sell.
Capital Gains Tax (CGT)
Tax on the profit from selling a rental property. From April 2024 the CGT annual exempt amount was reduced to £3,000 and residential property gains are taxed at 18% (basic rate) or 24% (higher rate). A CGT return must be filed and tax paid within 60 days of completion.
Capital Growth
The increase in a property’s market value over time, as distinct from the rental income it produces. It is only realised (and taxed, via Capital Gains Tax) when the property is sold. Many landlords weigh capital growth against rental yield when choosing where and what to buy.
EPC (Energy Performance Certificate)
A certificate rating a property's energy efficiency from A (most efficient) to G (least efficient). Rental properties in England must meet at least an E. Properties rated F or G cannot be legally let under MEES. An EPC is valid for 10 years. Maximum fine: £5,000 per property.
EPC C Proposal
Confirmed government policy to raise the minimum EPC rating for rental properties in England from E to C. Confirmed in the January 2026 Warm Homes Plan, the standard applies to all privately rented homes from a single deadline of 1 October 2030 (the earlier "2028 for new tenancies" proposal was scrapped in a U-turn). Landlords should plan upgrades now but verify the detailed rules on GOV.UK.