What Is a Good Gross Yield for a Buy-to-Let Property in 2026?

A good gross yield for a buy-to-let in 2026 sits roughly between 6% and 8% for a standard property in most of the UK, but that range is almost useless on its own. The headline yield ignores the two things that actually decide whether a property pays: how much you have borrowed, and how it is taxed once Section 24 and the separate property income rates are applied. A 9% gross yield can lose money, and a 5% one can throw off cash. This guide shows you how to calculate gross yield properly, what counts as good by region and property type, and how to get to the after-tax figure that matters.

How to calculate gross rental yield

Gross yield is the annual rent expressed as a percentage of the property's price: (annual rental income divided by purchase price) times 100. A property bought for 200,000 that lets for 14,000 a year produces a gross yield of 7%. It is a fast first screen, and it is the figure most listings and portals quote.

The problem is the denominator. Purchase price is not what a property costs you to acquire. Stamp duty (with the 5% additional-dwelling surcharge in England and Northern Ireland for most second properties), legal fees, surveys and any immediate works all add to the capital you have actually committed. Dividing by that total gives a yield that reflects reality.

Calculation basis	Cost figure	Annual rent	Gross yield
On purchase price	200,000	14,000	7.0%
Add SDLT surcharge (5%)	+10,000	14,000	6.7%
Add legal fees and survey	+2,000	14,000	6.6%
On total capital deployed	212,000	14,000	6.6%

The same property is either a 7% or a 6.6% yield depending on what you divide by. Neither is wrong, but you must be consistent when you compare deals, and you should quote the all-in figure when you are deciding whether to buy. The rest of this guide uses gross-on-price for benchmarking, because that is how the market talks, then shifts to net and after-tax figures where the real decisions are made.

What counts as a good gross yield in 2026?

Rather than a single target, think in bands that map to how a property behaves once it is geared and taxed.

• Below 5%: common in London and the South East. For a leveraged higher-rate landlord this rarely covers costs once Section 24 is applied. It can still make sense if you are buying primarily for capital growth or buying with little or no mortgage.
• 5% to 6%: a marginal zone for geared property. It can work for a lower-rate taxpayer, a cash buyer, or a property with strong growth prospects, but it leaves little room for rate rises or void periods.
• 6% to 8%: the healthy mainstream target for a standard buy-to-let. Enough headroom to absorb a stressed mortgage, repairs and the occasional void while still producing net cash.
• 8% and above: usually signals a strong northern or Midlands rental market, or a higher-management format such as an HMO. Treat very high gross yields with care, since they often carry higher management intensity, faster wear, or thinner capital growth.

These bands are a starting point, not a rule. The right minimum for you depends on your marginal tax rate, your loan-to-value, and whether the property is bought for income now or growth later.

Regional benchmarks: why geography sets the headline

UK yields vary more by region than by anything else, because rents do not rise in proportion to prices. The same household income supports broadly similar rents across the country, but property prices diverge sharply, so high-price areas mechanically show low yields.

• Higher-yield markets (often 7% or more): parts of the North East, Yorkshire, the North West, and central Scotland. A 130,000 terraced house in a strong rental town letting at 9,750 a year shows a 7.5% gross yield.
• Mid-yield markets (around 5% to 7%): Manchester, Birmingham, Leeds, Liverpool, Nottingham and similar regional cities. A 175,000 family house letting at 11,400 a year produces a 6.5% gross yield.
• Lower-yield markets (3% to 5%): London and much of the South East. High prices compress the yield; investors here typically lean on long-run capital growth rather than current income.

Note the devolved tax differences when you compare across borders. In Scotland the purchase tax is Land and Buildings Transaction Tax (LBTT) plus the Additional Dwelling Supplement (ADS), and in Wales it is Land Transaction Tax (LTT) with its own higher-rate surcharge. These do not change the rent, but they change the cost base and therefore the all-in yield, which matters most in low-yield deals where every cost counts.

Property type changes the yield you should expect

Format is the second biggest driver after region. Different structures carry different management loads, void patterns and tenant profiles, so a "good" yield for one is poor for another.

Property type	Typical gross yield	What drives it
Standard single let (flat or house)	6% to 8%	Simple management, broad tenant demand, one rent stream
HMO (let by the room)	8% to 12%+	Multiple rent streams, offset by licensing, fire safety and heavier management
Student accommodation	7% to 10%	Strong demand in university cities, but seasonal voids over summer
Holiday or short-let	Highly variable	Higher gross but seasonal; note the furnished holiday lettings tax regime was abolished from 6 April 2025

The furnished holiday lettings change is the one that catches landlords out. Since 6 April 2025 there is no FHL regime: former FHL properties are taxed as ordinary property income, lose the old capital-allowances and CGT reliefs, and fall within the Section 24 finance-cost restriction like any other let. If your high-yield short-let case rested on the old FHL treatment, the numbers have moved. For a fuller look at the room-let format, see our HMO versus standard buy-to-let tax comparison.

Gross yield is not the number that decides a deal

Two properties can share a gross yield and behave completely differently once you net them off. Consider two single lets, both bought outright for simplicity:

• Property A: bought for 100,000, rent 9,000 (9% gross). High maintenance, an older building, and two months of void a year. After repairs, insurance, letting and compliance costs and the void, net income lands around 5,400, a net yield near 5.4%.
• Property B: bought for 180,000, rent 12,600 (7% gross). Modern, low maintenance, fully let. After the same categories of cost it nets around 11,000, a net yield near 6.1%.

The lower-gross property wins on net return because its costs and voids are lower. This is the central lesson of yield analysis: screen on gross, decide on net. And once you add finance and tax, the gap can widen further, which is where Section 24 comes in.

The after-tax yield: Section 24 and the 2027 rates

For an individual landlord, the most important adjustment is Section 24, now fully in force. You can no longer deduct mortgage interest from rental profit. Instead, your profit is calculated before interest, and you receive a basic-rate tax credit (20%) for finance costs. A higher or additional-rate landlord therefore pays tax at their marginal rate on a profit figure that ignores most of their largest cost, then claws back only 20% as a credit. The practical effect is that gearing is taxed more heavily, and a leveraged purchase needs a higher gross yield to survive.

Looking ahead, the picture is settled rather than speculative. The Finance Act 2026 enacted separate property income tax rates from 6 April 2027: 22% basic, 42% higher and 47% additional. These apply in England, Wales and Northern Ireland, with Scotland setting its own rates. Crucially, the Section 24 finance-cost credit rises in step to 22%, so no new basic-rate wedge opens up. Higher and additional-rate landlords should model their net yield under the new rates, but should not expect a sudden cliff edge for basic-rate cases. Our guide to the 2027 property tax rates and the incorporation decision works through who is affected and by how much.

A worked Section 24 example

Take a higher-rate landlord with a single let producing 14,000 rent a year, against an 8,000 interest-only mortgage cost and 2,000 of other allowable expenses.

• Taxable rental profit (Section 24 basis, interest excluded): 14,000 minus 2,000 = 12,000.
• Income tax at 40% on 12,000 = 4,800.
• Less basic-rate finance credit at 20% of 8,000 = 1,600.
• Net tax: 3,200. Actual economic profit after the 8,000 interest: 14,000 minus 8,000 minus 2,000 = 4,000.

The landlord keeps 800 after tax (4,000 economic profit minus 3,200 tax) on a property that showed a healthy gross yield. Under the old pre-Section 24 rules the tax would have been 40% of the true 4,000 profit, that is 1,600, leaving 2,400. Same rent, same costs, very different take-home. This is why the gross headline can flatter a geared higher-rate position, and why the after-tax yield is the figure that should drive the decision. A limited company, by contrast, still deducts interest in full, which is why many leveraged higher-rate landlords look at a buy-to-let limited company structure. For the full mechanics of the credit, see our complete guide to Section 24 tax relief.

Financing: the yield your lender demands

Even before tax, your lender sets a floor. Buy-to-let mortgages are stress-tested: rent must cover a multiple of the notional mortgage payment at a stressed interest rate, commonly 125% for lower-rate borrowers and up to 145% for higher-rate borrowers, with the exact figure varying by lender and product. In a higher-rate environment this often means a leveraged purchase needs a gross yield in the high 6s or above simply to pass affordability, before any allowance for repairs, voids or tax. Cash buyers and lower-geared landlords escape this constraint and can accept lower yields, which is one reason the "good yield" question has no universal answer.

Capital growth versus yield

Yield is only half of total return. A low-yield property in a strong-growth location can out-total a high-yield property in a flat market over a long hold, because the equity gain dwarfs the income difference. The trade-off is timing: growth is back-loaded and uncertain, while yield is cash in hand now. If you need the property to fund you, prioritise net yield. If you are building long-term wealth and can ride out thinner current income, a growth-led lower-yield deal can be the better play. Most durable portfolios hold a mix, so that yield funds the running costs while growth builds the balance sheet. When you eventually sell, the gain is taxed at the residential CGT rates of 18% (basic-rate band) and 24% (above it), after the annual exempt amount of 3,000; our guide to current CGT rates on property covers the disposal side.

Costs and compliance that erode net yield

Three current obligations belong in every net-yield model rather than as afterthoughts:

• Making Tax Digital for Income Tax: now live. Landlords with qualifying income over 50,000 must keep digital records and file quarterly from 6 April 2026, with the threshold dropping to 30,000 from 6 April 2027 and 20,000 from 6 April 2028. Budget for compatible software and the added record-keeping time. Our guide to the Making Tax Digital April 2026 deadline sets out who is in scope.
• Renters' Rights Act 2025: the abolition of Section 21 no-fault evictions affects how you plan around problem tenancies and void risk, which feeds into your realistic void assumption.
• Allowable expenses: the surest way to protect net yield is to claim every deduction you are entitled to, from letting and maintenance costs to the replacement of domestic items. Our landlord tax deductions list is a useful checklist before you file.

Improving the yield on a property you already own

If an existing property is underperforming, the levers are practical rather than dramatic. Review the rent to market regularly, since a let that has drifted below market is the most common silent drag on yield. Reduce voids by keeping the property well presented and priced to let quickly. Consider value-adding works, such as an additional bedroom or energy-efficiency upgrades, that support a higher rent and may be deductible. And do not overlook structure: making sure your ownership arrangement and tax position suit your circumstances often does more for net yield than squeezing the rent. As portfolios grow, the structural questions multiply, which is why our guide on how to scale a buy-to-let portfolio looks at the tax decisions that come with size.

The bottom line

A good gross yield in 2026 is one that survives stress. For a standard, geared, higher-rate landlord that usually means 6% to 8% on price, but the gross figure is a screening tool, not a verdict. The deal is decided by the net yield after finance and the after-tax yield after Section 24 and the 2027 separate property rates. Run the deal both ways, on purchase price and on total capital deployed, stress it against a higher mortgage rate, and let the surviving cash flow, not the headline, tell you whether to buy. If you want a second pair of eyes on the structure or the after-tax position, that is exactly the kind of question a property accountant exists to answer, and the wider tax picture is covered in our property investment tax guide.