Gross vs net rental yield: what's the difference? (UK, 2026)
Gross yield is the marketing number — annual rent ÷ price. Net yield subtracts the real costs of holding and running the property: management, voids, maintenance, insurance, service charge, licensing. The UK gap is typically 1.5–2.5 percentage points and matters more than most agents admit.
Running costs (optional, annual)
Gross yield: 0.00%
Net yield: 0.00%
Yield is one measure of rental return — it ignores capital growth, mortgage interest and tax. Use alongside a proper cash-flow projection.
The two formulas
Gross yield is the simple one:
Annual rent ÷ Property value × 100
For a £200,000 property earning £1,100/month rent:
£13,200 ÷ £200,000 = 6.6% gross
Net yield subtracts every cost of running and holding the property before dividing:
(Annual rent − Annual running costs) ÷ Property value × 100
Same property, with realistic running costs:
| Cost | Annual |
|---|---|
| Annual rent (£1,100 × 12) | £13,200 |
| Management (10%) | (£1,320) |
| Maintenance (1% of value) | (£2,000) |
| Insurance | (£350) |
| Service charge (typical leasehold) | (£1,500) |
| Voids (2 weeks/year) | (£508) |
| Net income | £7,522 |
Net yield = £7,522 ÷ £200,000 = 3.8%.
A 2.8-percentage-point gap. That's typical for a UK leasehold flat.
Why the gap exists
The biggest costs by descending order, on a typical UK BTL:
- Maintenance (~1% of value/year)
- Service charge (£1,500+ for leasehold)
- Management (10–12% of rent if fully managed)
- Voids (2–4 weeks of lost rent per year)
- Insurance (~£250–500/year)
- Licensing (selective and HMO, where applicable)
In percentage-of-yield terms, maintenance and service charge are the dominant deductions for typical leasehold flats. Management is third. Voids and insurance are smaller.
Three property types compared
Same £200,000 price, different ownership structures:
Leasehold flat (typical city-centre)
- Rent £1,100/mo, gross 6.6%
- Service charge £1,500
- Management £1,320, maintenance £2,000, insurance £350, 2-week voids
- Net: 3.8% (gap: 2.8 pp)
Freehold semi (typical Northern city outer ring)
- Rent £1,100/mo, gross 6.6%
- No service charge
- Management £1,320, maintenance £2,000, insurance £350, 2-week voids
- Net: 4.5% (gap: 2.1 pp)
HMO (4-bed multi-let)
- Rent £1,800/mo (4 × £450 rooms), gross 10.8%
- HMO licensing £600/yr (annualised), no service charge but heavier maintenance
- Management £2,592 (12%), maintenance £3,000 (1.5%), insurance £450, 4-week voids per room
- Net: 6.2% (gap: 4.6 pp)
The gross-net gap increases with operational complexity. HMOs deliver superior absolute net yield but the gap is wider — and the operational overhead (tenant turnover, licensing, fire safety) is much heavier.
Why agents quote gross
Three reasons:
- Easier to compare across properties — gross is a single number; net depends on assumptions
- It's bigger — a 7% gross sells better than a 4% net when prospecting investor buyers
- Costs vary by management style — a self-managing landlord saves the 10% fee; the agent's number is style-agnostic
None of this is dishonest — gross is a legitimate metric. But for a serious investment decision, always compute net with your specific operating model. A "great 8% yield" leasehold flat in central Birmingham can produce a 3% net once service charges are layered in.
What net yield doesn't include
- Mortgage interest — that's cash-on-cash return territory
- Income tax — rental income tax depends on your marginal rate and Section 24 (mortgage interest restriction for personal landlords)
- Capital growth — a different return entirely
- Refurb capex — one-off rather than annualised
A complete BTL appraisal needs all four layered on top of net yield. This calculator gets you the foundational number.
Where Offrly fits
Both gross and net yield depend on the rent number being honest — and rents in dense UK markets vary 15%+ between similar properties on the same street. Offrly's AI reads each comparable rental's photos (kitchen, layout, finish, light) and hyperlocal pricing resolves rents to the street rather than the postcode — in about 30 seconds. Free. No email. Useful as a sanity-check before signing the agent's marketing letter.
Run a free Offrly rental valuation →
Other rental yield calculators: Manchester · Birmingham · Leeds · Liverpool · Glasgow · Bristol · Buy-to-let UK · Head calculator
Disclaimer: Yield is one measure of rental return — it ignores capital growth, mortgage interest and tax. Use alongside a proper cash-flow projection.
FAQ: Gross vs net rental yield: what's the difference? (UK, 2026)
What's the difference between gross and net rental yield?
Gross rental yield is annual rent ÷ purchase price (or current value), expressed as a percentage. Net rental yield subtracts the costs of running the property — management, voids, maintenance, insurance, service charge, licensing — before dividing by price. UK gross-net gaps typically run 1.5–2.5 percentage points; bigger for leasehold flats with material service charges, smaller for freehold houses.
Which yield should I use to compare properties?
Net yield, when costs are realistically modelled. Gross yield is fine as a fast filter ('properties yielding 6%+ are interesting') but it overstates returns on leasehold and HMO stock and understates returns on freehold houses with low maintenance. For any serious comparison, run net yield with consistent cost assumptions across both properties.
What costs should net yield include?
Standard inclusions: management fees (10–12% if fully managed), maintenance (1% of value/year rule of thumb), landlord insurance (£250–£500/year), service charge and ground rent (leasehold flats), voids (2–4 weeks/year typical), licensing (selective and HMO where applicable). Excluded: mortgage interest (that goes into cash-on-cash return), income tax (depends on your marginal rate), capital growth (different return altogether).
Is net yield the same as cash-on-cash return?
No. Net yield uses the property's full price as denominator. Cash-on-cash return uses the actual cash you've put down (deposit + stamp duty + fees) and subtracts mortgage interest from net rental income. A leveraged BTL at 4% net yield and 4.5% mortgage rate can produce a cash-on-cash return of 6–9% depending on price growth and tax position — a fundamentally different number.
Why is the gross-net gap bigger on leasehold flats?
Service charge. Typical UK leasehold service charges run £1,500–£3,500/year, with new-build city-centre stock often higher. On a £200,000 flat that's 0.75–1.75 percentage points of gross yield gone before any other costs. Freehold houses skip this entirely — gross-net gap on a freehold semi is typically 1–1.5 pp vs 2.5–3+ pp on a leasehold flat at the same price.