Glossary

Buy-to-let terms, in plain English

The words you'll meet when checking a deal, and what they mean on today's UK rules.

Cash flow

What's left of the rent each month after every cost, mortgage included, before income tax.

Gross yield

A year's rent as a percentage of the price. Quick, but it ignores every cost.

Net yield

A year's rent after running costs (agent, repairs, insurance, empty weeks), as a percentage of the price. The mortgage isn't counted.

Return on cash

The cash left each year after every cost, as a percentage of the cash you put in: deposit, stamp duty and fees. Sometimes called ROI or cash-on-cash return.

Loan to value (LTV)

The mortgage as a percentage of the property's value. 75% LTV means a 25% deposit.

Principal

The amount borrowed. A repayment mortgage pays it off over the term; an interest-only one doesn't.

Interest-only mortgage

You pay only the interest each month (the loan × the yearly rate ÷ 12) and owe the whole loan at the end.

Repayment mortgage

Each payment covers the interest and some of the loan, so it's cleared by the end of the term. Payment = P × r(1 + r)ⁿ ÷ ((1 + r)ⁿ − 1), with r the monthly rate and n the number of payments.

Interest cover (ICR) and the stress test

The rent divided by the mortgage interest. Lenders test it at a higher 'stress' rate and usually want at least 1.25, or 1.45 from higher-rate taxpayers.

Stamp duty (England)

Since 1 April 2025: 0% up to £125,000, 2% to £250,000, 5% to £925,000, 10% to £1.5 million and 12% above. A buy-to-let or second home pays 5% more in every band, and buyers who don't live in the UK pay 2% more. First-time buyers living in the home pay nothing up to £300,000 and 5% to £500,000, with no relief above £500,000.

Land Transaction Tax (Wales)

Wales's version of stamp duty. Buy-to-lets and second homes pay the higher rates: 5% up to £180,000, 8.5% to £250,000, 10% to £400,000, 12.5% to £750,000, 15% to £1.5 million and 17% above. There's no first-time buyer relief.

Section 24

Landlords who own in their own name can't deduct mortgage interest from the rent. They get a tax credit of 20% of the interest instead (22% from April 2027). Companies deduct the interest in full.

Operating expense ratio (OER)

Running costs as a percentage of the rent, not counting the mortgage.

Empty weeks (voids)

Weeks a year with no tenant and no rent, while the costs carry on.

Equity

The part of the property you own: its value less the mortgage. It grows as prices rise or the loan is paid down, and a remortgage can release some of it as cash.

Tax rates checked against GOV.UK and the Welsh Revenue Authority on 8 October 2026.