Annual Landlord Profit
While monthly cash flow tells you whether a property survives month-to-month, annual profit is the number you report to HMRC and the one that ultimately determines whether the investment is worthwhile. This calculator computes annual profit by combining rent, mortgage interest, letting agent fees, insurance, maintenance, and void periods — and also shows your yield on equity so you can compare the return to alternative investments.
Why this matters
Landlords who only track monthly cash flow miss the full picture. Annual profit determines your tax liability, and yield on equity tells you whether your capital is working as hard as it could.
Key points
- Annual profit = annual rent minus mortgage interest minus allowable expenses
- For tax purposes, mortgage capital repayments are NOT deductible — only interest (as a 20% tax credit)
- Yield on equity = (annual profit ÷ equity value) × 100
- Equity = current property value minus outstanding mortgage balance
- A high-LTV property may show poor yield on equity even with positive cash flow
- Void period loss is a real cost that reduces annual profit — include a realistic estimate
Frequently asked questions
How do I calculate my annual rental profit for Self Assessment?
Annual rental profit = total rent received minus allowable expenses (maintenance, insurance, agent fees, professional fees, etc.) minus mortgage interest (which then gives a 20% tax credit under Section 24). Capital expenditure is not an allowable expense — only repairs.
What is yield on equity and how do I use it?
Yield on equity is the annual profit as a percentage of your equity in the property. As property values rise and mortgages are paid down, equity increases — which typically reduces yield on equity. If yield on equity falls below what you could earn elsewhere, it may be worth considering a sale or remortgage.
Does annual profit include capital gains?
No — annual profit is purely the rental income profit. Capital gains are separate and only crystallised when you sell. They are taxed under Capital Gains Tax at 18% (basic rate) or 24% (higher rate) on residential property.
What should my target annual profit be per property?
This depends on strategy and capital invested. A return of 6–10% on equity invested is often cited as a benchmark for a reasonably leveraged property investment in the UK.