Cash-on-Cash Return Calculator — United Kingdom 2026-27
Evaluating a property investment? See your actual cash return.
Calculate UK buy-to-let cash-on-cash return with deposit, stamp duty, rent, void periods, mortgage costs, expenses, and tax-relief assumptions.
UK Buy-to-Let Cash Return Notes
UK cash-on-cash return often depends on buy-to-let deposit size, stamp duty, interest-only versus repayment mortgage choice, service charges, void periods, letting fees, and mortgage-interest tax relief.
This version avoids Australian PAYE and rental loss relief language so UK landlords can compare rental cash yield against savings and gilt-style alternatives.
UK-specific treatment for cash on cash return: figures are framed in pounds, with British household or business wording and the assumptions commonly seen in PAYE, HMRC, mortgage, pension, and consumer-credit contexts.
Watch for UK markers in the page copy and inputs: HMRC, PAYE, National Insurance, pension contributions, stamp duty land tax, miles, APR, part-exchange, council tax, VAT, and GBP-based totals.
The result should be read as a United Kingdom estimate, so compare it with UK provider quotes, HMRC or GOV.UK guidance, lender affordability rules, devolved-nation differences, or regulated advice where needed.
Indicative estimates. Tax implications depend on full income profile. Always consult a licensed financial adviser and accountant before investing.
The Cash-on-Cash return formula explained
A simple but strict definition
Cash-on-Cash return (CoC) measures the annual pre-tax cash return on the actual cash you sunk into an investment. The formula is annual pre-tax cash flow ÷ total cash invested. 'Cash invested' means your deposit, stamp duty, legal and inspection fees, and any initial capex — not the borrowed portion. 'Cash flow' is net rent received minus loan repayments, council rates, strata, insurance, management, maintenance and vacancy allowance.
Worked example on a London flat
Buy a £600,000 London flat. Cash in: £120,000 deposit + £15,000 SDLT + £2,500 legals and pest/building = £145,570. Loan of £480,000 at 6.25% P&I costs £35,462/year. Rent at £550/wk = £28,600. Strata £4,500, rates £1,400, insurance £700, management 7% of rent (£2,002), maintenance 1% of value (£6,000), vacancy 2 weeks (£1,100). Total expenses before loan: £15,702. Net cash after loan: £28,600 − £15,702 − £35,462 = −£22,564, i.e. loss-making rental. CoC is −15.5% pre-tax — expected in year 1 of a high-growth AU metro strategy.
| Line | Amount |
|---|---|
| Annual rent | £28,600 |
| Holding costs | −£15,702 |
| Loan repayments | −£35,462 |
| Pre-tax cash flow | −£22,564 |
| Cash invested | £145,570 |
| CoC | −15.5% |
CoC is a pre-tax, pre-capital-growth measure — it ignores depreciation, tax refunds and capital appreciation. Use it to compare the immediate cashflow efficiency of different deals, not their lifetime return.
Typical UK property CoC return ranges
CoC varies wildly by strategy and location
UK residential markets are among the lowest-yielding in the OECD — capital growth has historically done the heavy lifting. The ranges below are indicative pre-tax CoC in year 1, assuming 80% LTV, current metro rates and typical holding costs. Data sources: CoreLogic median yields, SQM Research vacancy reports, and Residex rental surveys.
| Strategy | Typical CoC year 1 | Capital growth bias |
|---|---|---|
| London / Manchester city-centre flat | 0.5% to 1.5% | High |
| Birmingham / Leeds suburban house | 1% to 3% | High |
| Regional (North-East/Wales) house | 4% to 6% | Medium |
| Granny flat / dual-occupancy | 5% to 8% | Medium |
| NDIS / SDA housing | 7% to 12% | Low |
| Small commercial (office/retail) | 7% to 12% | Low–Medium |
Why metros still attract capital
Despite poor CoC, London and South-East dwellings have averaged 5–7% p.a. capital growth over 20 years (the ONS Residential Property Price Indexes). Investors willingly accept negative CoC for capital growth. For income-focused retirees or SIPP/SSAS pensions in pension phase, the yield-chasing end of the table is more relevant — at the cost of thinner growth and higher vacancy risk.
Cash-on-Cash vs gross rental yield vs IRR
Three different lenses on the same deal
These three metrics are routinely confused in UK property marketing:
Gross rental yield = annual rent ÷ property price. Ignores expenses and leverage. Used for high-level screening. A 4% gross yield on a £600k place means £24k rent. Published by CoreLogic monthly.
Net yield = (annual rent − expenses) ÷ property price. Better than gross. Still ignores financing. A £4k/year expense block drops a 4% gross yield to about 3.3% net.
Cash-on-Cash = (annual rent − expenses − loan repayments) ÷ cash in. Adds leverage into the picture. Usually much lower than net yield for residential, or even negative on highly-geared CBD units.
Internal rate of return (IRR) = the discount rate that makes net present value of all cashflows (including sale proceeds) zero. The only metric that properly incorporates capital growth and exit timing. Better for 10-year holding comparisons.
When to use which
Use gross yield to shortlist suburbs, net yield to compare holding costs between comparable properties, CoC to compare deals with different deposits or loan structures, and IRR to decide when to sell. The MoneyHelper investor guidance specifically warns that gross yield alone is misleading — it's a marketing number, not a return.
Levers to improve CoC on UK property
Levers that actually move the needle
Larger deposit. Taking LTV from 90% to 70% saves HLC (typically £10k+) and drops monthly interest. The CoC denominator rises, but annual cashflow can improve by £5k–£8k on a £500k loan — often net-positive once HLC is avoided.
Dual-income configurations. A granny flat (typical build £120k–£170k) can add £350–£500/week rent on the same land, lifting gross yield 1.5–2.5 percentage points without buying a second property. Check local council granny flat rules — local planning policy is the most permissive.
Interest-only vs P&I. IO lifts year-1 cashflow but doesn't build equity; FCA's 2017–19 clampdown reduced IO availability for investors. Currently ~50% of new investor loans are IO (Bank of England statistics). Use strategically, not permanently.
Depreciation schedule. Order a quantity-surveyor depreciation report (tax-deductible) to claim capital works (2.5%/year, post-1987 buildings) and plant-and-equipment depreciation on new fixtures. Typical year-1 deduction on a 5-year-old house: £8,000–£14,000.
PAYE variation (Form 1515, previously 221D). Applying to The HMRC for a PAYE instalment variation brings your rental-property tax adjustment forward through the year rather than waiting until tax time — helps CoC cashflow significantly.
Why a high CoC may still be a bad investment
High yield usually signals higher risk
A 10% CoC regional mining-town rental looks fantastic on paper — until SQM Research vacancy data shows 8% vacancy (vs 1–2% metro), rents fall 20% with the commodity cycle, and tenant quality drops. Regional UK markets show clear boom-bust patterns tied to single employers (Moranbah, Port Hedland, Gladstone). High CoC without diversification is a thinly-disguised bet on a local economy.
Interest-rate sensitivity
AU investor loans are overwhelmingly variable rate (80%+, Bank of England statistics). A 2 percentage point rate rise on a £500k investment loan adds about £10,000/year in interest — enough to flip a positive-CoC deal into negative territory. The Bank of England's 2022–23 hiking cycle (+4.25%) is a recent real-world stress test.
Maintenance, vacancy, and bad tenants
Budget 1% of property value for annual maintenance (higher on older stock), 2–4 weeks vacancy (longer in cheaper outer suburbs), and cover against 'tenancy disaster' cases. Landlord insurance (Terri Scheer, EBM) costs £300–£600/year and specifically covers rental default and tenant damage — small relative to the 1-in-25 risk of a significant event.
Opportunity cost of capital growth
A 7% CoC regional property growing at 2% p.a. delivers a 10-year compound return of ~9%. A 1% CoC London flat growing at 6% delivers ~7% — similar order of magnitude, and London's tenant pool is deeper. CoC alone cannot rank these. Always model IRR across your realistic holding period.
Where these figures come from
Savings and interest figures on this page are drawn from the Bank of England (cash rate and published deposit averages), FCA (the deposit-taker regulator), and MoneyHelper (consumer guidance).
- Bank of England cash rate — Bank of England — Cash Rate.
- Deposit interest-rate data — Bank of England — Retail Deposit and Investment Rates (F4).
- Financial Claims Scheme (deposit guarantee up to £250k) — FCA — Financial Claims Scheme.
- Compound interest & savings strategy — MoneyHelper — Saving.
- Inflation & CPI — the ONS — Consumer Price Index.
Last checked: April 2026. Rates and thresholds are reviewed against the source of record each November, when annual adjustments for the following tax year are published.
Select the question that matches where you are right now.
Your CoC return shows what percentage of your invested cash you get back annually as net cash flow. A positive number means the property is self-funding; negative means you are supplementing it from your salary.
Gross yield (rent ÷ property value) ignores your financing structure and expenses. Two investors buying the same property can have very different CoC returns depending on their deposit size, interest rate, and loan type. CoC is the metric that matters for your specific situation.
Compare your CoC to the term deposit rate (currently ~5%). A higher CoC means property is out-performing a risk-free investment on income alone. A lower CoC means you need capital growth to justify the investment. The comparison is shown in the return comparison chart (Standard mode).
CoC is only the income component. The real power of property is leverage: a 5% capital growth on a £600,000 property (bought with £120,000 cash) = £30,000 growth — a 25% return on your cash investment. Switch to Advanced mode and enter the property value and growth rate to see total equity return.
rental loss relief is the strategy of accepting a cash flow loss in exchange for tax savings and capital growth. Understanding the true after-tax cost is essential.
A property losing £5,000/yr pre-tax sounds significant — but at 37% marginal rate, you receive a £1,850 tax refund each year. Your actual out-of-pocket cost is £3,150/yr — £61/week. Many investors in capital cities pay £30–£80/week to own a property they expect to grow significantly. Enter your marginal rate in Detailed mode to see your specific after-tax CoC.
Depreciation is a non-cash deduction that further increases your paper loss without any additional cash outflow. A new property might have £10,000 in depreciation claims (building + fixtures). At 37% rate, that is an additional £3,700 tax refund — bringing the effective after-tax "income" from the property significantly closer to break-even, even with a negative cash flow.
rental loss relief is worthwhile when: (1) You have other taxable income (salary or business) to offset the loss against; (2) You are in a marginal rate of 40% or higher — making the HMRC subsidy meaningful; (3) You are confident in capital growth of at least 5–7%/yr for the property; (4) You have the cash flow capacity to sustain the shortfall for 5–10 years. It does NOT work for: investors with low income (the tax saving is small), in high-risk/low-growth areas where capital growth is uncertain, or investors who cannot sustain the cash shortfall during vacancy or interest rate rises.
The choice between interest-only and P+I significantly affects CoC return. Switch to Standard mode and toggle the loan type to see the exact difference for your scenario.
On a £480,000 loan at 5.5%, IO costs £26,400/yr; P+I (30yr) costs ~£32,700/yr — a £6,300/yr difference. On £120,000 cash invested, that is 5.25 percentage points of CoC return. Most investors prefer IO for investment properties because the lower repayments improve cash flow and the full interest remains deductible.
P+I reduces your loan balance each month — building equity. After 5 years on P+I at 5.5% on £480,000, you have reduced the loan by approximately £28,000. This equity is real wealth — but illiquid. IO does not build equity through repayments, relying on capital growth instead. If you expect strong capital growth, IO makes sense. If growth is uncertain, P+I provides a forced equity buffer.
Banks typically limit IO to 5 years for investment loans. When the IO period ends, repayments increase significantly — the remaining loan is amortised over the remaining term (25 years if IO for 5 years on a 30-year loan). Budget for this reversion when stress-testing your investment. If rates rise during your IO period, the reversion to P+I becomes even more expensive. Have a clear exit strategy or refinance plan before the IO period expires.
If your CoC is too low or negative, here are the levers you can pull — some at purchase, some over time.
Regular market rent reviews (at lease renewal) ensure you are not significantly below market. In most states, rent can only be increased once per 12 months for existing tenants. A £50/week rent increase = £2,600/yr extra income — approximately 2 percentage points of CoC on a £120,000 investment. Use sites like Rightmove or Zoopla to compare similar properties in your area.
Vacancy has a disproportionate impact on CoC — one month vacant equals 8.3% of annual rent lost. Strategies: (1) Price rent at market (not above) to fill quickly; (2) Accept pets (dramatically increases tenant pool); (3) Provide well-maintained property — good tenants want good homes; (4) Give advance notice of lease expiry and start finding tenants 6 weeks early. Each percentage point of vacancy reduction adds directly to CoC return.
Every 0.5% rate reduction on a £480,000 loan saves £2,400/yr = 2 percentage points of CoC on £120,000 invested. Mortgage rates for investment properties vary significantly between lenders — 0.5–1.5% differences are common for the same LTV and borrower profile. Refinancing every 2–3 years to chase the most competitive rates is standard practice for active property investors. Use a mortgage broker for access to wholesale rates.