Ask ten property investors what a good rental yield is and you will get ten different answers. Part of the reason is that the headline figures quoted in the press rarely agree, and part of it is that most people are quoting gross yield when the number that actually decides whether a property makes money is the net figure underneath it.

This guide sets out how to calculate both, what the data says about returns in 2026, and why a high yield on paper does not always translate into a sound investment.

What rental yield actually measures

Rental yield is the annual rental income a property produces, expressed as a percentage of what the property is worth or what you paid for it. It is the single most useful way to compare the income performance of two properties in different areas and at different price points, because it strips out the absolute numbers and leaves you with a like-for-like return.

It is worth being clear from the outset that yield measures income only. It says nothing about capital growth, which is the increase in the property's value over time. A complete view of a buy-to-let investment combines both, and the two often pull in opposite directions, which is a point we will come back to.

Gross yield: the headline figure

Gross yield is the simple version, and it is the number behind almost every "best places to invest" league table. You take the annual rent, divide it by the property value, and multiply by 100.

A property worth £200,000 let at £1,000 a month produces £12,000 a year. Divided by £200,000 and multiplied by 100, that is a gross yield of 6 per cent.

Gross yield is useful for a quick comparison and for filtering a long list of areas down to a shortlist. Its weakness is that it ignores every cost of actually running the property, so it consistently flatters the real return.

Net yield: the number that matters

Net yield does the same calculation but deducts the running costs from the annual rent before dividing by the property value. Those costs typically include letting and management fees, insurance, maintenance and repairs, ground rent and service charges on leasehold flats, compliance costs such as gas safety and electrical checks, and an allowance for void periods when the property sits empty between tenancies.

The gap between gross and net is rarely small. For most properties it sits at two to three percentage points, which means a property advertised at a 7 per cent gross yield may deliver something closer to 4 to 5 per cent once the bills are paid. Two properties with identical gross yields can produce very different net returns once you account for a high service charge on one or frequent voids on the other.

This is why serious investors run the net calculation before committing to anything. If you want to compare the gross and net figures on a property quickly, it helps to work out the rental yield on both bases rather than relying on the advertised headline alone.

What counts as a good rental yield in 2026

There is no universal threshold, and the published averages vary depending on what data is used. Measures based on Office for National Statistics figures put the average gross yield across England and Wales at roughly 5.6 to 6 per cent in early 2026. Lender portfolio data tends to read higher: Fleet Mortgages' Q1 2026 rental barometer reported an average above 8 per cent, reflecting the fact that mortgaged buy-to-let stock skews towards the higher-yielding regions of the country.

As a working rule for 2026, anything above 6 per cent is generally regarded as a good gross yield, and 7 per cent or more is considered strong. The geography behind those numbers is consistent across every source. The North East, the North West, Yorkshire and the Humber, Wales and parts of Scotland lead the way, driven by lower property prices set against solid tenant demand. London sits at the other end, with average yields around 5 per cent and prime central areas closer to 3 to 4 per cent, because high purchase prices suppress the income return even where rents are high.

The reason those regional patterns hold is straightforward. Yield rises when rent grows faster than price, and it is highest where entry prices are low relative to achievable rent. That is exactly the position in much of the north of England and Wales at present.

Why a high yield is not always a good investment

The temptation is to chase the highest number on the table, but a very high yield can be a warning rather than an opportunity. A 9 per cent gross yield in a town with a weak local economy and falling property values may underperform a 5 per cent yield in a city with strong employment and steady capital growth, once you account for the value of the asset itself over a holding period.

High-yield areas can also carry higher costs that the gross figure hides, including more frequent voids, greater tenant turnover, and higher maintenance on older housing stock. The headline yield looks attractive precisely because the property is cheap, and the property is cheap for reasons that may also affect its long-term performance. The discipline is to treat a high gross yield as a prompt to investigate, not as a conclusion.

How tax and regulation reshaped the net picture

Two changes have widened the gap between gross and net returns for many landlords, and both belong in any 2026 yield calculation.

The first is the Section 24 restriction on mortgage interest relief, which is now fully in force. Individual landlords can no longer deduct mortgage interest as an expense before calculating taxable profit, and instead receive a basic-rate tax credit. For higher-rate taxpayers with geared portfolios, this has materially reduced post-tax income and, in some cases, turned a healthy gross yield into a thin net return.

The second is the Renters' Rights Act 2025, which came into force on 1 May 2026 and abolished fixed-term assured shorthold tenancies in favour of periodic tenancies. The Act does not change the yield formula, but it does affect the assumptions behind it, particularly around void planning and the cost of managing tenancies under the new regime. Returns in well-selected markets remain sound, but the sensible response is to model net yield carefully rather than to rely on pre-2026 rules of thumb.

Running the numbers before you buy

A reliable yield assessment comes down to honest inputs. Use a realistic achievable rent rather than the optimistic figure on a listing, build in a void allowance of at least a few weeks a year, and include every recurring cost, not just the obvious ones. Then compare the net result against the regional benchmark for the area, and weigh it against the capital growth prospects rather than viewing it in isolation.

Doing this by hand is fiddly, and it is easy to leave a cost out. A rental yield calculator that produces both the gross and net figures from the same set of inputs removes that risk and lets you compare several properties on a consistent basis in minutes. Whatever method you use, the principle holds: the yield you should trust is the net one, calculated on conservative assumptions, and read alongside the wider case for the area.