Student HMO Financial Model

No mortgage / paid off

Your property is mortgage free. No deductions are made and there is no Section 24 calculation needed.

Interest only

Your entire monthly payment is interest — there is no capital repayment. Common with buy-to-let mortgages. Enter your monthly payment. The full amount is used for the Section 24 tax credit (20% applied against your tax bill) and is deducted as a cash cost against your take-home.

Repayment mortgage

Your monthly payment is split between interest and capital repayment. Only the interest portion qualifies for the Section 24 tax credit — capital repayment gives no tax relief as you are simply paying back the loan and building equity. Enter both figures; check your annual mortgage statement or ask your lender for the split.

Don't know the split

Enter your total monthly payment. The tool deducts it as a cash cost so your take-home figure is accurate. However, because the interest portion is unknown the Section 24 tax credit cannot be applied — your actual tax bill may be slightly lower than shown. Check your mortgage statement for the exact split when you can.

What is Section 24?

Since 2020, landlords cannot deduct mortgage interest directly from rental income before calculating tax. Instead you pay tax on the full rental profit, then receive a 20% tax credit on the interest. This hits higher and additional rate taxpayers hardest — you are taxed at 40% or 45% on money that goes straight to the bank, but only receive 20% back as a credit.

The headline rate is rarely the full cost

Most agents advertise a base management fee of 8–12% but charge a range of additional fees on top that can add another 3–6% to your real cost. Make sure you enter your true all-in percentage, not just the headline rate.

Common additional charges to watch for

• Inventory / check-in report — typically £80–£150 per tenancy
• Check-out report — typically £80–£120 per tenancy
• New tenancy contract fee — typically £50–£150
• Deposit Protection Service (DPS) registration fee
• Renewal fee when a tenant stays on
• Maintenance call-out charges or contractor markups
• Annual gas safety certificate arrangement fee

VAT — often overlooked

If your agent is VAT registered — and most are — VAT at 20% is added on top of every fee they charge. A 10% management fee becomes 12% after VAT. A 12% fee becomes 14.4%. Always check whether the percentage you have been quoted is inclusive or exclusive of VAT, and enter the VAT-inclusive figure in this tool.

Example — what 10% really costs

A base fee of 10% + VAT = 12%. Add inventory, check-out, contract and renewal fees spread across the year and the true all-in cost is typically 14–18% of gross rent. Enter that real figure here for an accurate picture of what you are actually paying.