By the UKPropertyCalculator team • Published 27 June 2026 • Updated 4 October 2026
We took the average home in 30 cities across England and Wales, put a standard 75% buy-to-let mortgage on it at the current average rate, let it at the average local rent, and ran the result through the tax rules an individual landlord faces. In every one of the 30, the property loses money before tax. In every one of the 30, a higher-rate taxpayer then owes income tax on it anyway.
Ranked from the smallest loss to the largest for a higher-rate (40%) individual landlord. All cash flow figures are annual.
| # | City | Avg price | Avg rent (pcm) | Gross yield | Cash flow before tax | Tax due, higher rate | Cash flow after tax, higher rate | Break-even LTV, higher rate |
|---|---|---|---|---|---|---|---|---|
| 1 | Newcastle upon Tyne | £208,000 | £1,215 | 7.0% | −£260 | £1,714 | −£1,974 | 55% |
| 2 | Kingston upon Hull | £136,000 | £694 | 6.1% | −£1,350 | £885 | −£2,235 | 43% |
| 3 | Nottingham | £190,000 | £1,014 | 6.4% | −£1,193 | £1,374 | −£2,568 | 48% |
| 4 | Stoke-on-Trent | £147,000 | £715 | 5.8% | −£1,731 | £902 | −£2,633 | 41% |
| 5 | Sunderland | £147,000 | £707 | 5.8% | −£1,806 | £887 | −£2,693 | 40% |
| 6 | Portsmouth | £251,000 | £1,368 | 6.5% | −£1,086 | £1,914 | −£3,000 | 50% |
| 7 | Manchester | £252,000 | £1,373 | 6.5% | −£1,091 | £1,921 | −£3,013 | 50% |
| 8 | Southampton | £236,000 | £1,257 | 6.4% | −£1,336 | £1,736 | −£3,072 | 49% |
| 9 | Liverpool | £189,000 | £913 | 5.8% | −£2,084 | £1,188 | −£3,272 | 42% |
| 10 | Norwich | £224,000 | £1,142 | 6.1% | −£1,781 | £1,546 | −£3,326 | 46% |
| 11 | Salford | £229,000 | £1,170 | 6.1% | −£1,781 | £1,588 | −£3,369 | 46% |
| 12 | Birmingham | £234,000 | £1,099 | 5.6% | −£2,707 | £1,445 | −£4,152 | 41% |
| 13 | Bradford | £183,000 | £745 | 4.9% | −£3,339 | £886 | −£4,225 | 32% |
| 14 | Bristol | £352,000 | £1,883 | 6.4% | −£1,572 | £2,674 | −£4,246 | 50% |
| 15 | Plymouth | £223,000 | £1,004 | 5.4% | −£3,017 | £1,290 | −£4,307 | 38% |
| 16 | Leicester | £227,000 | £1,023 | 5.4% | −£3,050 | £1,317 | −£4,367 | 38% |
| 17 | Coventry | £228,000 | £1,020 | 5.4% | −£3,130 | £1,310 | −£4,440 | 38% |
| 18 | Leeds | £248,000 | £1,145 | 5.5% | −£3,012 | £1,503 | −£4,515 | 40% |
| 19 | Swansea | £205,000 | £852 | 5.0% | −£3,493 | £1,042 | −£4,535 | 34% |
| 20 | Derby | £207,000 | £860 | 5.0% | −£3,523 | £1,053 | −£4,576 | 34% |
| 21 | Wolverhampton | £221,000 | £945 | 5.1% | −£3,464 | £1,184 | −£4,647 | 36% |
| 22 | Cardiff | £272,000 | £1,177 | 5.2% | −£3,971 | £1,515 | −£5,486 | 37% |
| 23 | Reading | £350,000 | £1,574 | 5.4% | −£4,354 | £2,101 | −£6,455 | 40% |
| 24 | Milton Keynes | £330,000 | £1,344 | 4.9% | −£5,453 | £1,711 | −£7,164 | 34% |
| 25 | York | £311,000 | £1,199 | 4.6% | −£5,811 | £1,478 | −£7,290 | 32% |
| 26 | Brighton and Hove | £409,000 | £1,808 | 5.3% | −£5,263 | £2,420 | −£7,682 | 39% |
| 27 | Stockport | £318,000 | £1,119 | 4.2% | −£6,926 | £1,315 | −£8,241 | 27% |
| 28 | Oxford | £472,000 | £1,963 | 5.0% | −£7,119 | £2,583 | −£9,702 | 36% |
| 29 | London (all boroughs) | £550,000 | £2,332 | 5.1% | −£7,763 | £3,117 | −£10,880 | 38% |
| 30 | Cambridge | £475,000 | £1,805 | 4.6% | −£8,752 | £2,282 | −£11,035 | 32% |
A basic-rate taxpayer owes no tax in any of the 30, so their result is the "before tax" column. City names link to our local guides where we have one. Figures are rounded to the nearest pound.
Since April 2020 an individual landlord cannot deduct mortgage interest from rental income. Tax is charged on the profit before finance costs. You then receive a reduction worth 20% of the lowest of three figures: your finance costs, your property profit, or your adjusted total income above the personal allowance.
Take the average Manchester home as a worked example:
| Manchester, average home | Per year |
|---|---|
| Gross rent (£1,373 x 12) | £16,476 |
| Void allowance, six weeks | −£1,901 |
| Letting agent, 12% of rent collected | −£1,749 |
| Maintenance, 1% of value | −£2,520 |
| Insurance and compliance | −£700 |
| Profit before finance costs | £9,606 |
| Mortgage interest (£189,000 at 5.66%) | −£10,697 |
| Cash flow before tax | −£1,091 |
| Tax at 40% on £9,606 | £3,842 |
| Less 20% reduction, capped at the £9,606 profit | −£1,921 |
| Tax due | £1,921 |
| Cash flow after tax, higher rate | −£3,013 |
The property is £1,091 short of covering its own costs, and the landlord still owes £1,921. The interest that could not be relieved carries forward to later years, which helps only if the property eventually turns a profit.
A basic-rate taxpayer is not caught in the same way. Their 20% tax is cancelled by the 20% reduction, so they owe nothing and are left with the pre-tax loss. The trap is specific to landlords whose rental profit is taxed at 40% or more, including those pushed into the higher band by the rental profit itself.
Any study like this depends on its assumptions, so we reran all 30 cities under six alternatives. The table shows how many cities are cash-flow positive in each case.
| Scenario | Positive before tax | Positive after tax, basic rate | Positive after tax, higher rate |
|---|---|---|---|
| Base case: 75% LTV at 5.66%, 12% agent, six weeks void | 0 of 30 | 0 of 30 | 0 of 30 |
| Self-managed, no agent fee | 6 of 30 | 6 of 30 | 0 of 30 |
| Self-managed and only three weeks void | 9 of 30 | 9 of 30 | 0 of 30 |
| 60% LTV at 4.89% | 16 of 30 | 16 of 30 | 1 of 30 |
| 60% LTV at 4.89%, self-managed | 27 of 30 | 27 of 30 | 8 of 30 |
| June 2026 assumptions: 5.0%, 10% agent, three weeks void | 8 of 30 | 8 of 30 | 0 of 30 |
| No mortgage | 30 of 30 | 30 of 30 | 30 of 30 |
Two things stand out. The higher-rate column stays at zero under every 75% mortgage scenario, including the lighter assumptions used in the June edition. And the picture reverses completely with no mortgage: every city is profitable for every taxpayer. The average rental is not a bad asset. It is an asset that no longer supports a 75% loan at current rates, and the tax rules make that worse for higher earners.
The last column of the main table is the largest mortgage, as a share of the price, at which a higher-rate landlord breaks even after tax at the same 5.66% rate. In Newcastle it is 55%. In Manchester, Portsmouth and Bristol it is about 50%. In Stockport it is 27%, which means putting down nearly three quarters of the price in cash.
The other route is yield. Holding everything else constant at the median price of £231,500, a landlord needs a gross yield of about 7.1% to break even before tax and about 8.9% to break even after tax at the higher rate. The highest yield in the study is Newcastle's 7.0%. Averages hide better deals, and a below-average price or an above-average rent is exactly what a buyer should be looking for. The point is that the average deal no longer works, so the deal has to be better than average.
Not at these numbers. A company deducts mortgage interest in full and pays corporation tax at 19% on profits up to £50,000. That removes the Section 24 problem, but only when there is a profit to tax. In all 30 cities the base case makes a loss before tax, so the company pays no tax and is left with the same loss a basic-rate individual has. A company also tends to face higher mortgage rates and has accountancy costs, neither of which is modelled here.
A company starts to matter in the scenarios where the deal is profitable before tax, such as a 60% mortgage. There it stops a higher-rate owner being taxed on interest they have paid. It cannot turn a loss-making property into a profitable one.
From 6 April 2027 property income gets its own tax rates of 22%, 42% and 47%, and the finance cost reduction rises to 22%. For the base case in this study the change makes no difference to the tax bill. Where interest exceeds profit, the reduction is capped at the profit, so a higher-rate landlord pays 42% less 22% on that profit, which is the same 20% as today. The change bites on landlords whose profit exceeds their interest, including those with small mortgages or none.
Run your own deal through the numbers
Our free calculator applies the Section 24 rules to your own price, rent and mortgage, and shows personal and limited company ownership side by side.
BTL Cash Flow & Section 24 Calculator →Glasgow and Edinburgh were in the June edition. They are shown separately here and not ranked, for two reasons. ONS publishes Scottish rents for broad rental market areas (Greater Glasgow and Lothian), not for the city council area that the price refers to, so the yield is not like for like. And Scottish taxpayers pay different income tax rates on rental income. The figures below apply the same model and the same 40% rate, which fits a landlord resident elsewhere in the UK.
| City | Avg price | Avg rent (pcm) | Gross yield | Cash flow before tax | Tax due, higher rate | Cash flow after tax, higher rate | Break-even LTV, higher rate |
|---|---|---|---|---|---|---|---|
| Glasgow* | £194,000 | £1,266 | 7.8% | +£951 | £2,027 | −£1,076 | 63% |
| Edinburgh* | £304,000 | £1,415 | 5.6% | −£3,427 | £1,896 | −£5,322 | 41% |
* Rent is for the Greater Glasgow and Lothian broad rental market areas. Glasgow is the only place in either table with a positive pre-tax result, and that depends on the area mismatch.
One identical model was applied to every city. Only the local price and rent change.
Two things combine. At the average buy-to-let rate of 5.66%, interest on a 75% mortgage is larger than the rental profit on the average home in all 30 cities studied. Section 24 then taxes that profit before interest is deducted and gives back only a 20% reduction, so a 40% taxpayer owes tax of between £885 and £3,117 a year on a property that made a cash loss.
Newcastle upon Tyne. With an average price of £208,000 and an average rent of £1,215 a month it has the highest gross yield of the 30 cities at 7.0%. The average home there loses £260 a year before tax and £1,974 after tax for a higher-rate landlord, and breaks even for a higher-rate landlord at about a 55% mortgage.
Only where the property makes a profit before tax. A company deducts mortgage interest in full, but in the base case of this study every city makes a pre-tax loss, so there is nothing for the company structure to shelter. It becomes useful at lower loan to value, where the deal is profitable and the question is how that profit is taxed.
This study is general information, not financial or tax advice. Your tax position depends on your full circumstances. Speak to a qualified accountant before making decisions. See our Disclaimer.