The best and worst UK regions for buy-to-let landlords

Life as a landlord isn’t getting any easier as landlords face higher taxes while renters have been given stronger rights via the Renters’ Rights Act – but it can still be profitable for investors willing to put in the work.

The average gross rental yield – the return landlords get before costs, expressed as a percentage of the property’s value before costs – in the UK reached 7.22%, the highest level since 2011, in the third quarter of 2026, according to Paragon Bank.

The figure is up from average yields of 7% in the second quarter of 2026 and up from 6.94% in Q3 2025, meaning the average landlord is getting a higher return on their investment.

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Rental yields have been strengthening since 2022, as house price growth has remained subdued, in part because of higher mortgage rates, while demand for privately rented homes has stayed high.

Louisa Sedgwick, managing director of mortgages at Paragon Bank, said: “Buy-to-let yields reaching their highest level since 2011 demonstrates the attractive returns that well-managed rental property can continue to generate.

“The increase reflects the balance between property values and rental income, with more subdued house price growth combining with strong demand for rented homes across many parts of the country.”

But although yields are at a 15-year high, the figures do not show how much of this yield landlords are keeping after accounting for the costs of administering their property portfolios.

Those costs are set to increase too.

Tax on property income will rise by two percentage points from April 6, 2027.

Rental income will be taxed at 22% for those on the basic rate of income tax, 42% for those on the higher rate, and 47% for those on the additional rate from 2027/28 onwards.

Despite headwinds in the buy-to-let market and an increased tax burden on the horizon, landlords will be buoyed by rising rental yields – but some regions are far more lucrative than others.

What are rental yields?

A rental yield measures how much profit a landlord can expect to make from their rental property each year and is used to work out whether a property is a good investment or not.

Rental yield is expressed as a percentage of rental income against the property’s market value.

For example, if you earn £10,000 a year from renting out a property worth £100,000, your rental yield would be 10%.

Rental yields are usually broken down into gross and net yield. The gross figure does not take into account any costs, like mortgage payments or insurance, or time when the property is unoccupied. Net rental yield does factor in these costs.

The Mortgage Works, the buy-to-let lender of Nationwide Building Society, has a calculator you can use to work out the rental yield of a property.

Where is the top UK region for buy-to-let?

The UK region with the highest gross rental yields in Q3 2026 was the East Midlands, where properties generated an average yield of 8.1%, up 0.55 percentage points since the previous quarter, Paragon Bank said.

The North East and Yorkshire had the second highest overall gross rental yield in the third quarter of 2026 at 8.02%, marginally lower than the East Midlands. This was followed by Scotland, where rental yields were an average of 7.95%.

Credit: Paragon Bank (12 October 2026)

Rental properties in London were by far the worst-performing in the country, with average rental yields in the city dipping to 5.79%, over two percentage points lower than yields in the East Midlands.

Meanwhile, buy-to-let properties in the South East did not fare much better, delivering average yields of just 6.58%. Worse yields in London and the South East reflect how house prices in these regions are far higher than elsewhere in the UK.

Sedgwick said: “The regional figures also show why landlords carefully consider local market conditions when investing. Areas with more affordable property values and sustained tenant demand can offer particularly attractive yields, as we see in the East Midlands and across the north of England.”