Buy-to-Let Rental Income Calculator
Gross and net rental yield, monthly cash flow, and — crucially — the real post-tax profit after Section 24. The mortgage interest restriction has turned thousands of apparently profitable properties into after-tax losses; see where yours stands.
LTV 75% — loan £165,000
Interest-only — the BTL norm
Full management typically 10–15%; let-only 5–8%
Typically 5–10% for ongoing wear and repairs
Insurance, gas safety, EPC, licensing
Where the rent goes (annual)
Income & cost breakdown
| Line | Annual | Notes |
|---|---|---|
| Annual rent (full occupancy) | £13,200.00 | |
| Void allowance (2 weeks) | −£507.69 | |
| Collected rent | £12,692.31 | |
| Letting agent fees | −£1,269.23 | |
| Maintenance allowance | −£660.00 | |
| Other costs (insurance etc.) | −£350.00 | |
| Net operating income | £10,413.08 | 4.7% yield |
| Mortgage interest (interest-only) | −£9,075.00 | |
| Pre-tax profit | £1,338.08 | |
| Income tax (Section 24, 40%) | −£2,350.23 |
Section 24 (2016 Finance Act): from April 2020 individual landlords can no longer deduct mortgage interest from rental income — only a 20% basic-rate tax credit applies. This can produce a taxable profit even when the property runs at a cash loss. Figures assume the rental income falls entirely within your current tax band; if it pushes you into a higher band, the tax charge will be greater.
How this calculator works
The calculator assumes an interest-only mortgage — the norm for buy-to-let — so the monthly payment is simply loan × rate ÷ 12. Collected rent is gross rent less the void allowance, then agent fees and maintenance are subtracted to give the net operating income (the yield figure most useful for comparing properties). Mortgage interest is then deducted to arrive at the pre-tax profit.
The tax calculation follows Section 24: the full net operating income (not the profit) is taxed at your marginal rate, then a 20% tax credit is applied against the interest — capped so tax can never go negative. For higher-rate taxpayers this routinely produces a tax charge larger than the pre-tax profit.
Worked example
A £220,000 property, £55,000 deposit, 5.5% interest-only, £1,100/month rent with 10% letting agent, 5% maintenance, 2 void weeks, and £350 other costs:
- Collected rent: £12,692/yr
- Net operating income: £10,413/yr (4.7% net yield)
- Mortgage interest: £9,075/yr (£756.25/month)
- Pre-tax profit: £1,338/yr
- Higher-rate landlord: tax £2,350 → post-tax loss £1,012/yr
- Basic-rate landlord: tax £268 → post-tax profit £1,070/yr
Frequently asked questions
What is Section 24 and why does it matter so much?
Before April 2020, landlords could deduct mortgage interest directly from rental income before working out their tax bill. Section 24 of the 2016 Finance Act replaced that with a 20% basic-rate tax credit. For higher-rate taxpayers this is dramatically less valuable: on £220,000 with a £165,000 mortgage at 5.5%, a higher-rate landlord now owes £2,350 in income tax against a pre-tax profit of only £1,338 — a post-tax loss of £1,012 a year. The same property run by a basic-rate landlord returns £1,070 after tax.
What is gross yield vs net yield?
Gross yield is annual rent ÷ property price × 100 — a quick comparator that ignores all costs. Net yield (also called net operating yield) deducts agent fees, maintenance, and other running costs before dividing, giving a truer picture of the income the property generates before finance. This calculator shows both: gross 6.0% and net 4.7% on the default example.
What is the rental cover ratio (ICR) and why do lenders care?
The interest coverage ratio is monthly rent ÷ monthly mortgage interest, expressed as a percentage. Most BTL lenders require 125% for basic-rate landlords and 145% for higher-rate taxpayers — meaning rent must cover the interest by 25–45%. At 5.5%, the default example shows a 145% cover ratio, which meets both thresholds.
Should I own the property personally or through a limited company?
A limited company pays corporation tax (currently 19–25%) on rental profits and is not subject to Section 24 — mortgage interest remains fully deductible. For higher-rate landlords this can mean a significantly lower tax bill, especially on leveraged properties. The trade-off: higher mortgage rates for SPVs, additional accountancy costs, and dividend tax when extracting profits. This is one of the most consequential decisions in BTL — take professional advice before choosing a structure.