Nottingham's 9.2% yield claim hides a £313 monthly loss

Section 24 has already eaten into your Yorkshire margins for six years, and every EPC deadline and Renters' Rights Act obligation seems to take another bite out of what's left. So when a new city gets marketed at a 9.2% yield, you don't get excited, you get suspicious, and you're right to be. Nottingham is this month's headline name: East Midlands prices grew faster than any other English region this year, and adverts for the city are quoting yields up to 9.2%. Run the actual numbers on an average purchase, though, and a very different picture appears.

At Nottingham's real average rent and sold price, that 9.2% becomes 4.67% gross and 3.36% net, before Section 24 has even been applied. Add the tax, and a higher-rate taxpayer buying at the city average ends up roughly £313 a month worse off than the headline figure would suggest.

East Midlands is growing faster than anywhere else in England

The East Midlands recorded annual price growth of 3.2% in the year to May 2026, the strongest of any English region, taking the regional average to £241,000 (HM Land Registry HPI, May 2026, published July 2026). That compares with a national annual change of just 1.8% over roughly the same period (Nationwide HPI, July 2026), meaning the region is outpacing the country by nearly double. It's the kind of growth story that tends to pull capital-growth-focused investors in first and income-focused ones second, which is exactly the trap worth avoiding.

Nottingham, the region's largest city and the obvious first stop for most portfolios expanding into the East Midlands, has an average sold price of £258,915 (Zoopla, sourced from HM Land Registry sold-price data, accessed August 2026), sitting a little above the regional average thanks to strong demand from the city's two universities. Leicester, the region's second city, is cheaper again: an average price of £230,107 against average rent of £1,025 a month works out to a 5.35% gross yield (RealYield, June 2026), a genuinely better income case than Nottingham's city average before the same Section 24 and stamp duty maths is applied to it.

So if growth is genuinely why you're looking at the East Midlands rather than income, that's a defensible case on its own terms; growth and yield are two separate arguments, and only one of them survives the maths below.

Nottingham's marketed 9.2% yield, checked against reality

Portfolio marketing sites currently quote Nottingham buy-to-let yields of up to 9.2% (PropertyInvestmentsUK, 2026), and the city's NG7 student postcode genuinely does reach 8-12% on smaller, higher-rent lets (Northwood UK, 2026). That's not the number a landlord buying at the city's actual average price and rent will see.

Nottingham's average private rent was £1,007 a month in April 2026, up 3.8% on the year from £970 (ONS Price Index of Private Rents, April 2026). Set that against the city's average sold price of £258,915 and the real gross yield is 4.67%, less than half the headline figure being marketed. This is the same claim-versus-reality gap already logged in Manchester's marketed 9% yield, which calculated to an actual 6.6% once checked against the city average, and it echoes the thin regional averages found in both the East of England spotlight and the South West spotlight earlier this month.

So treat any Nottingham postcode yield you're shown as a claim to verify, not a number to trust, the same discipline that already applied to Manchester.

The cash flow at 75% LTV, before tax

Buy at Nottingham's average price of £258,915 with a 75% loan-to-value buy-to-let mortgage and you're putting down a £64,729 deposit against a £194,186 loan. At the current average buy-to-let fixed rate of 5.42% (Moneyfacts, 1 July 2026), that's £877 a month in interest on an interest-only basis, the standard structure for most buy-to-let lending.

Against £1,007 a month in rent, strip out a 12% management fee (£121), a maintenance reserve of 5% of rent (£50), landlord buildings insurance of £312 a year (£26 a month, ABI Premium Tracker, early 2026) and a one-month annual void allowance (£84), and you're left with £726 a month in net operating income before the mortgage is paid. Set that against the £877 monthly interest bill and the property is already £151 a month out of pocket before any tax is due.

So before tax has entered the picture at all, an average-priced Nottingham buy-to-let is costing you money every month, not making it.

Section 24: what it costs at each tax band

Because mortgage interest can no longer be deducted as a business expense, a landlord pays income tax on the full rental profit before interest relief and claims only a 20% credit against the interest paid, capped at that profit figure whenever interest exceeds it. On this purchase, annual mortgage interest of £10,525 is larger than the £9,718 profit before interest relief, so the credit is capped at 20% of £9,718, which is £1,944 a year, or £162 a month.

For a basic-rate (20%) taxpayer, tax due on the £9,718 profit is also £1,944, exactly matching the capped credit, so no further cash leaves the account. The loss stays at £151 a month. For a higher-rate (40%) taxpayer, tax due is £3,887, leaving £1,943 after the credit, roughly £162 a month, which takes the total loss to £313 a month, or £3,756 a year.

So being a basic-rate taxpayer doesn't rescue this purchase, it just stops Section 24 from making it any worse; the loss was already there before the taxman arrived.

Stamp duty adds another £15,892 before you've collected a penny in rent

The East Midlands sits entirely in England, so Stamp Duty Land Tax applies, not Scotland's Land and Buildings Transaction Tax or Wales's Land Transaction Tax. Additional residential properties, including every mortgaged buy-to-let purchase, carry a 5% surcharge on top of the standard bands, raised from 3% on 31 October 2024 at the Autumn Budget. On a £258,915 purchase, that means 5% on the first £125,000, 7% on the next £125,000 and 10% on the remaining £8,915, a total bill of £15,892.

Set that against the monthly cash flow figures above and the stamp duty bill alone is worth more than eight years of the basic-rate shortfall, or roughly four years of the higher-rate one, paid upfront before the first month's rent has landed. Run your own numbers through our stamp duty calculator and our Section 24 tax calculator before making an offer.

So before this property has paid you a single month's rent, you've already handed over a tax bill worth years of the eventual shortfall, which makes the purchase price only half the story.

What this means for you

The East Midlands' 3.2% growth is real, and it's a genuine reason to keep the region on your radar. But the maths points toward treating that growth as the whole case, not a bonus on top of a strong income yield, because an average-priced Nottingham purchase doesn't clear either tax band on income alone. If you're pursuing this city, target a verified outperforming postcode such as NG7's student market, where 8-12% yields are real rather than marketed, or buy meaningfully below the £258,915 average with rent confirmed against comparable local lets, not an agent's projection. Leicester's 5.35% city-average yield is worth a closer look for the same reason: it clears Nottingham's average by a wide margin before either city's Section 24 position is even calculated, though it deserves its own full worked example rather than an assumption that it simply carries over. Older Nottingham terraces, common in the city's student and inner suburbs, are also likely to need EPC upgrades before the 1 October 2030 deadline, with costs capped at £10,000 per property and fines of up to £30,000 for non-compliance (Warm Homes Plan, GOV.UK, published 21 January 2026, subject to final legislation), so check the current rating before you factor a property into your numbers, not after you've exchanged. Frankly, if you're a higher-rate taxpayer and a specific property can't clear the £151-a-month pre-tax loss calculated here by a wide margin, walk away, because Section 24 is only going to make it worse, not better.