How to Analyse a Buy-to-Let Deal (UK 2026 Guide)
The numbers on a buy-to-let deal can look very different depending on which ones you include. A listing might advertise a 7% gross yield — but once you account for mortgage costs, void periods, management fees, maintenance, insurance and the tax changes brought in by Section 24, the actual return can be far lower. This guide walks through how to analyse a deal properly before you buy.
Gross Yield vs Net Yield
Gross yield is the headline figure: annual rent divided by purchase price, expressed as a percentage. It's useful for quick comparisons between properties but tells you very little about actual profitability.
Net yield deducts all running costs from the annual rent before dividing by purchase price. This is the number that actually matters.
Example: A property purchased for £200,000 achieving £1,000/month rent has a gross yield of 6%. After deducting mortgage interest (£450/mo), management fees (£100/mo), insurance (£30/mo), maintenance allowance (£80/mo) and void allowance (8% = £80/mo), net income is £260/mo — a net yield of just 1.56%.
SDLT (Stamp Duty) — April 2025 Rates
Getting SDLT right is critical because it's one of the largest upfront costs in any property purchase. For additional properties (buy-to-let), the rates from April 2025 are:
| Purchase price band | Standard rate | Additional property surcharge | Total rate |
|---|---|---|---|
| £0 — £125,000 | 0% | 5% | 5% |
| £125,001 — £250,000 | 2% | 5% | 7% |
| £250,001 — £925,000 | 5% | 5% | 10% |
| £925,001 — £1.5m | 10% | 5% | 15% |
| Over £1.5m | 12% | 5% | 17% |
SDLT is calculated on a banded basis — you pay each rate only on the portion of the price that falls within each band.
⚠ Don't forget: The additional property surcharge of 5% applies to the entire purchase price from pound one — so a £200,000 BTL purchase means £10,000 SDLT from the surcharge alone, before the banded rates.
Total Cash Required
The cash you need to complete a purchase is more than the deposit. A full cost breakdown:
- Deposit: Typically 25% for a BTL mortgage (some lenders accept 20% or 15%)
- SDLT: Calculated as above
- Legal fees (conveyancing): £1,000–£2,500 depending on solicitor and complexity
- Survey: £400–£1,500 depending on type (basic valuation to full structural survey)
- Mortgage broker fee: £500–£1,500 or 0.5–1% of loan amount
- Refurbishment: Budget carefully — cosmetic works to full renovation
- Initial void period: Budget for 1–2 months of mortgage payments before the first tenant moves in
Section 24 — The Tax Calculation That Changes Everything
Section 24 of the Finance Act 2015 phased out mortgage interest relief for individual landlords between 2017 and 2020. Under the old rules, you deducted mortgage interest from rental income before calculating tax. Under Section 24, you pay tax on the full rental income, then receive a 20% tax credit on mortgage interest.
For a basic rate (20%) taxpayer, the effect is broadly neutral. For higher rate (40%) or additional rate (45%) taxpayers, Section 24 significantly increases the tax bill.
Example: A higher-rate taxpayer with £12,000 rental income and £8,000 mortgage interest. Old system: tax on £4,000 profit = £1,600. New system: tax on £12,000 = £4,800, minus 20% credit on £8,000 = £1,600, net tax = £3,200. Section 24 has doubled the tax bill.
This is why many landlords have incorporated — a limited company pays Corporation Tax (25%) and can still deduct mortgage interest as a business expense. However, incorporation has its own costs and complexities, including SDLT on the transfer.
The BRRR Strategy
Buy, Refurbish, Refinance, Rent — BRRR is a strategy where you buy a below-market property, improve it, refinance against the higher value and pull most of your cash back out, then rent it out. When executed well, it allows you to recycle capital across multiple purchases.
The key metrics for BRRR are:
- Purchase price + refurb cost = total money in
- After Refurb Value (ARV) = new valuation after works
- Refinance loan (75% of ARV) = cash extracted
- Cash left in deal = total cost minus cash extracted
- Cash-on-cash return = annual profit divided by cash left in
HMO Analysis — Per-Room Rents
HMO properties generate significantly higher gross rents than single-let properties of comparable size. A 5-bed house let as a single let might achieve £1,200/month; as an HMO with each room let individually, the same property might generate £2,500–£3,500/month.
But HMOs have higher costs: licensing fees, higher maintenance, more management time, furnishing costs and greater void risk per room. The net yield advantage over single-lets is often smaller than the gross yield suggests.
Run the numbers before you buy
OwnProperly's deal calculator handles BTL, HMO, SA and BRRR analysis — with correct April 2025 SDLT rates, Section 24 tax modelling and full cost breakdowns. Analyse any listing in under 5 minutes.
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