How to work out the real yield on a UK commercial property
A brochure says "7% net initial yield". What does that mean, and is it the yield you will get?
Not always. Agents usually work the figure out with a standard allowance for buying costs. Your actual costs depend on the price and on which part of the UK the property is in. On many lots under £5 million, the real tax is lower than the allowance. So the yield you get can be a little higher than the one in the brochure.
This guide shows you how to check the figure yourself. You need 3 numbers: the price, the rent and the tax.
Gross yield and net initial yield
Gross yield is the simplest figure. Divide the yearly rent by the price.
£58,000 rent ÷ £850,000 price = 6.82%
Net initial yield (NIY) is what the market uses. It divides the rent by the price plus the costs of buying. Those costs are stamp duty (or its Welsh or Scottish version) and fees for agents, solicitors and surveyors.
NIY = yearly rent ÷ (price + buying costs)
Because the costs make the bottom number bigger, the NIY is always lower than the gross yield.
One point before we go on. "Net" here means net of buying costs. It does not take off running costs. On a full repairing and insuring (FRI) lease the tenant pays for repairs and insurance, so the rent is close to what you keep. On other leases you may pay some costs yourself. Check the lease.
The 6.8% convention
In UK commercial property, agents and valuers commonly assume buying costs of 6.8% of the price. One valuation guide says costs are "typically 6.8% of the purchase price, which includes a stamp duty of 5%" (Leveraged Breakdowns). The other 1.8% is generally taken to cover professional fees and VAT on those fees.
So a brochure yield is usually:
Rent ÷ (price × 1.068)
For our £850,000 shop with £58,000 rent, that gives 6.39%.
The convention lets everyone compare lots on the same basis. But stamp duty is not a flat 5%. It is charged in bands, so smaller lots pay much less than 5% of the price.
The actual tax rates (checked 18 October 2026)
England and Northern Ireland share one tax. Wales and Scotland each have their own. These are the rates for buying non-residential property.
England and Northern Ireland: Stamp Duty Land Tax (SDLT) (GOV.UK)
| Part of the price | Rate |
|---|---|
| Up to £150,000 | 0% |
| £150,001 to £250,000 | 2% |
| Above £250,000 | 5% |
Wales: Land Transaction Tax (LTT), for purchases from 22 December 2020 (Welsh Government)
| Part of the price | Rate |
|---|---|
| Up to £225,000 | 0% |
| £225,001 to £250,000 | 1% |
| £250,001 to £1,000,000 | 5% |
| Above £1,000,000 | 6% |
Scotland: Land and Buildings Transaction Tax (LBTT), for purchases from 25 January 2019 (Revenue Scotland)
| Part of the price | Rate |
|---|---|
| Up to £150,000 | 0% |
| £150,001 to £250,000 | 1% |
| Above £250,000 | 5% |
Each rate applies only to the part of the price inside that band. GOV.UK gives this example: a £275,000 freehold in England pays £0 on the first £150,000, £2,000 on the next £100,000 and £1,250 on the last £25,000. That is £3,250 in total.
If you are granted a new lease, tax on the rent is worked out in a different way. The bands above are for the price you pay.
Worked examples
In each example below we use the actual tax, plus fees of 1.8% of the price. The 1.8% is only an assumption to make the examples comparable. Use the quotes you get from your own solicitor and surveyor.
Example 1: a £300,000 shop with £24,000 rent
- Gross yield: 8.00%
- Brochure yield with the 6.8% allowance: 7.49%
| Figure | England | Wales | Scotland |
|---|---|---|---|
| Tax | £4,500 | £2,750 | £3,500 |
| Tax as % of price | 1.50% | 0.92% | 1.17% |
| Fees at 1.8% | £5,400 | £5,400 | £5,400 |
| Total cost | £309,900 | £308,150 | £308,900 |
| Net initial yield | 7.74% | 7.79% | 7.77% |
On a lot this size, the real yield is about 0.25 percentage points above the brochure figure.
Example 2: an £850,000 convenience store with £58,000 rent
- Gross yield: 6.82%
- Brochure yield with the 6.8% allowance: 6.39%
| Figure | England | Wales | Scotland |
|---|---|---|---|
| Tax | £32,000 | £30,250 | £31,000 |
| Tax as % of price | 3.76% | 3.56% | 3.65% |
| Fees at 1.8% | £15,300 | £15,300 | £15,300 |
| Total cost | £897,300 | £895,550 | £896,300 |
| Net initial yield | 6.46% | 6.48% | 6.47% |
The gap is smaller here. The higher the price, the closer the tax gets to 5%.
Example 3: a £2,000,000 industrial unit with £130,000 rent
- Gross yield: 6.50%
- Brochure yield with the 6.8% allowance: 6.09%
| Figure | England | Wales | Scotland |
|---|---|---|---|
| Tax | £89,500 | £97,750 | £88,500 |
| Tax as % of price | 4.47% | 4.89% | 4.42% |
| Fees at 1.8% | £36,000 | £36,000 | £36,000 |
| Total cost | £2,125,500 | £2,133,750 | £2,124,500 |
| Net initial yield | 6.12% | 6.09% | 6.12% |
At £2 million the real yield and the brochure yield are almost the same. In Wales, the 6% band above £1 million means the tax is close to the allowance.
Things that change the answer
VAT on the price. If the seller has opted to tax the building, VAT may be added to the price. Stamp duty is then worked out on the VAT-inclusive price (HMRC SDLTM03800). Many let properties are sold as a "transfer of a going concern" (TOGC), where no VAT is charged. HMRC sets strict conditions for this, including that the buyer opts to tax and tells HMRC in time (HMRC VAT Notice 700/9). Ask your solicitor early.
Shops with flats. A mixed-use building, such as a shop with a flat above, is taxed at non-residential rates in England (GOV.UK) and Scotland (Revenue Scotland). Ask your solicitor how a mixed building in Wales will be treated.
Rent that is not yet paid. Some brochures quote a yield on a rent that starts after a rent-free period, or after a review. Ask what rent is being paid today.
Budget changes. The Autumn Budget is on 28 October 2026. Tax rates can change. We will update this page if they do.
How to compare with the market
Yields on their own say little. Compare them with similar property. Knight Frank's prime yield guide for October 2026 shows, for example, 5.50% for foodstores on open market reviews and 6.50% to 7.00% for good secondary industrial estates (Knight Frank, prepared 6 October 2026). Those are for large institutional lots. Smaller lots usually trade at higher yields. The average auction yield in the first quarter of 2026 was 8.65% (Acuitus cPad Q1 2026).
A higher yield is not always better. It can point to a weaker tenant, a short lease or a poor building. Values can fall as well as rise.
Try it with your own numbers
Our free yield calculator does these sums for you. Enter the price, the rent and your fee estimate, and pick England, Wales or Scotland. It shows the tax, the total cost, the net initial yield and the brochure figure side by side. It runs in your browser and does not store what you type.
If you would like YieldBell to email you when a property that fits your brief is listed, you can book a 30-minute call to tell us what you look for.
Sources
Last checked 18 October 2026.
- GOV.UK: www.gov.uk/stamp-duty-land-tax/nonresidential-and-mixed-rates
- Welsh Government: www.gov.wales/land-transaction-tax-rates-and-bands
- Revenue Scotland: revenue.scot/taxes/land-buildings-transaction-tax/non-residential-property
- Leveraged Breakdowns: www.leveragedbreakdowns.com/2023/06/21/commercial-real-estate-valuation-methods
- Knight Frank, prepared 6 October 2026: www.knightfrank.co.uk/site-assets/research/report-pdfs/yield-guide/10.-kf-final-october-2026-prime-yield-guide.pdf
- HMRC VAT Notice 700/9: www.gov.uk/guidance/transfer-a-business-as-a-going-concern-and-vat-notice-7009
- HMRC SDLTM03800: www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm03800
- Acuitus cPad Q1 2026: www.acuitus.co.uk/app/uploads/Acuitus_cPad_Report_Q1_2026-FINAL.pdf
Check the numbers on a listing
Our free yield calculator works out the net initial yield with the actual property tax for England, Wales or Scotland. It runs in your browser and stores nothing.
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