UK Glossary

A planning rule used by local councils to remove the permitted development right to convert a single-family home into an HMO. In Article 4 zones you must apply for full planning permission before converting. Always check the local council's planning portal before purchasing a property for HMO conversion.

A lender valuation checks security for the loan; it is not a condition survey. RICS Home Survey levels are Level 1 (basic visual review), Level 2 (more detailed inspection) and Level 3 (the most detailed assessment).

A specialist mortgage for a rental property. Deposits, ICR stress tests, rates, fees and repayment types vary by lender and product.

Short-term secured finance used to bridge a funding gap or complete work before refinancing. Rates, retained or serviced interest, arrangement and exit fees, term and default provisions are product-specific.

Annual cashflow as a percentage of total cash invested — deposit plus purchase costs including SDLT. It accounts for financing, but there is no universal target; compare the result with the risks and alternative uses of capital.

Tax that can apply to a chargeable gain on a property disposal. Private Residence Relief may exempt all or part of a qualifying home gain. For individuals from 6 April 2026, CGT rates are 18% and 24%, subject to taxable income and the facts of the disposal; the annual exempt amount is £3,000.

The legal process of transferring property ownership. Handled by a solicitor or licensed conveyancer. Involves searches (local authority, drainage, environmental), reviewing contracts, exchanging contracts, and completing the transfer. In England and Wales, the sale is not legally binding until exchange of contracts.

A certificate rating energy efficiency from A to G. Subject to exemptions, privately rented homes generally need at least E today. The government has stated an aim for qualifying privately rented homes to reach C or equivalent by 1 October 2030; implementation details can still change.

The stage at which signed contracts are exchanged and the purchase becomes legally binding. The contract sets the deposit, completion date and consequences of default; these terms are transaction-specific. Your conveyancer should confirm the exact obligations before exchange.

Buying, refurbishing and selling property. Tax treatment follows the facts and acquisition intention; no single frequency or holding-period test decides whether profit is trading income or a capital gain. The “70% rule” is an optional screening convention, not a valuation standard or recommended offer.

Freehold means you own the property and land outright. Leasehold means you own the property for a fixed term while the freeholder owns the land. Most flats in England and Wales are leasehold. Properties with fewer than 80 years remaining on the lease can be difficult to mortgage and sell.

Annual rental income as a percentage of purchase price before deducting expenses. It is a quick screening metric; compare current achieved local rents and like-for-like prices rather than using a national target.

Ground rent is a lease payment to the freeholder. The Leasehold Reform (Ground Rent) Act 2022 generally limits ground rent in qualifying new regulated leases to a peppercorn. Service charges are separate and lease-specific; review the lease, current budget, accounts and planned major works.

HMO definitions and licensing differ across the UK. In England, three or more people forming two or more households who share facilities is a common HMO definition; five or more occupants usually triggers mandatory licensing. Councils can license smaller HMOs, and Scotland, Wales and Northern Ireland use different regimes.

A common BTL affordability ratio comparing evidenced rent with stressed mortgage interest. Lenders choose product-specific stress rates, ICR thresholds and whether other income can support the application.

A mortgage where scheduled payments cover interest but do not reduce capital. The loan must be repaid at the end using an acceptable repayment strategy. Availability and criteria vary by lender and product.

The Scottish equivalent of SDLT, charged on property purchases in Scotland. Different bands and thresholds apply. An Additional Dwelling Supplement (ADS) of 8% applies to additional residential properties in Scotland — the equivalent of the BTL surcharge in England.

The ratio of mortgage balance to property value. Product availability, pricing and maximum LTV vary by lender, property, borrower and date.

The Welsh equivalent of SDLT, charged on property purchases in Wales. Different bands and thresholds apply. A Higher Residential Rates surcharge applies to additional properties in Wales. Always check the Welsh Revenue Authority for current rates.

Annual rental income after operating expenses as a percentage of the chosen cost base. State whether the denominator is purchase price or total acquisition cost, and model property-specific voids, management, maintenance and insurance.

A scenario comparison of the renter's investment position with the buyer's net sale proceeds and invested monthly savings. There is no universal break-even year: price growth, investment returns, finance, rent, maintenance and transaction costs can reverse the result.

Since April 2020, individual residential landlords generally cannot deduct finance costs from property income before Income Tax. A basic-rate reduction may apply, capped by statutory measures including finance costs, property-business profit and adjusted total income. Companies can generally deduct qualifying interest, but Corporation Tax and extraction tax remain.

Tax charged on property purchases in England and Northern Ireland, normally filed and paid within 14 days of completion. It is banded. Higher residential rates add 5 percentage points and usually apply when the transaction leaves an individual owning more than one dwelling; companies generally pay them on residential acquisitions. Exceptions and special transactions must be checked.

BTL lenders commonly assess rent against a stressed interest rate. PRA expectations apply in scope, but exact stress rates, thresholds, remortgage treatment and top-slicing policies vary by lender and product.

The period when a rental property is empty between tenancies, generating no rent while finance, insurance and other costs may continue. Set the allowance from local tenancy evidence and stress-test longer simultaneous vacancies rather than relying on a fixed national range.

Replaced the old 10% Wear and Tear Allowance in April 2016. Landlords of furnished properties can now only deduct the actual cost of replacing domestic items (furniture, appliances, kitchenware) — not an automatic percentage of rental income. Covers like-for-like replacement only, not upgrades.

For refurbishment or development projects, yield on cost measures annual rent as a percentage of total project cost — purchase plus all works, finance costs, legal fees, and SDLT. More relevant than market yield for forced-appreciation strategies where value is added through refurbishment.