Glossary
Property investment, in plain English.
39 essential UK property investment terms, from AST and BTL to SDLT, SPV and Section 24. Plain-English definitions, no jargon dressed up as insight.
A
- Rules requiring professionals to verify identity and source of funds.
- Under the Money Laundering Regulations 2017 estate agents and property consultants must verify clients' identity and source of funds before acting. Expect to provide passport, utility bill and bank statements before any transaction is progressed.
- Full definition →
- Article 4 Lettings
- Council direction restricting conversion of homes to HMOs.
- An Article 4 direction removes permitted development rights so an HMO cannot be created without full planning permission. Major HMO cities (Manchester, Birmingham, Liverpool, Nottingham, Sheffield) have them in specific wards. Check council's Article 4 map before buying for HMO conversion.
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- The standard UK residential tenancy agreement.
- An AST is the default private residential tenancy in England and Wales. Typically 6 or 12 months fixed term, then periodic. Under the Renters Reform Bill, the default tenancy model is moving to a periodic-from-day-one structure with abolition of Section 21 no-fault evictions.
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B
- Buying residential property to rent to tenants.
- A buy-to-let investment earns through monthly rental income and any uplift in property value on eventual sale or refinance. Typically requires a 25% deposit, stamp duty surcharge of 3% (England), and an appropriate BTL mortgage product.
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C
- Cash-on-cash return Investment
- Annual net cashflow as a percentage of the total cash you invested.
- Calculated as: annual net rental cashflow ÷ total cash invested (deposit + stamp duty + legals + reserves) × 100. A more honest metric than gross yield because it reflects your actual capital at risk.
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- Tax on the gain when you sell an investment property.
- For UK residents selling BTL property: 18% (basic rate) or 24% (higher rate) on gains above the annual exempt amount. Non-residents also pay CGT on UK residential property. Limited companies pay Corporation Tax on gains instead.
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- Completion Legal
- The day ownership transfers and keys hand over.
- Completion is when the purchase price transfers from buyer to seller, the Land Registry is updated, and keys are released. For off-plan purchases, completion happens when the building is finished and practical completion is signed off, usually 18–36 months after reservation.
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- Completion date Investment
- The quarter/year an off-plan building is expected to finish.
- Off-plan schemes are sold with indicative completion dates. Delays of 2–4 quarters are common. Developer contracts typically permit 12-month longstops before buyers can rescind, check yours carefully.
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E
- Required energy rating of a property for sale or let.
- All rented properties need a valid EPC of rating E or above (moving to C by 2028 proposals). Costs £60–£120 to commission, valid for 10 years.
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- Exchange Legal
- The legally binding stage of a property transaction.
- When contracts exchange, both parties are legally committed. The buyer typically pays a 10% deposit at exchange. Completion follows, usually 1–28 days later for completed property, months or years later for off-plan.
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F
- Freehold Ownership
- Outright ownership of the land and building.
- The owner holds the property indefinitely with no ground rent. Most houses in the UK are freehold. Freehold flats are rare and legally complex, usually you'd buy leasehold with a share of freehold instead.
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- Property let for short stays on Airbnb, Booking.com etc.
- FHLs qualify for capital-gains reliefs, mortgage-interest deduction and pension contributions, historically. The FHL tax regime is being abolished from April 2025, aligning treatment with standard BTL. Check local short-let restrictions (90-day cap in London, licensing in Scotland).
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G
- Gross yield Investment
- Annual rent as a percentage of property price, ignores costs.
- Calculated as: (monthly rent × 12) ÷ property price × 100. Useful as a quick comparison number but misleading, it ignores void allowances, service charges, maintenance, management fees and tax.
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- Ground rent Ownership
- Annual fee paid by leaseholders to the freeholder.
- New leasehold flats since 2022 must have peppercorn (zero) ground rent. Older stock may have £100–£500 annually, sometimes escalating (doubling every 10–25 years). Escalating ground rents are toxic, lenders avoid them.
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H
- A single house let to 3+ unrelated tenants sharing facilities.
- HMOs deliver higher gross yields (typically 8–12%) but need Article 4 planning awareness, HMO licence (mandatory for 5+ occupiers), and higher management overhead. Not all areas permit new HMOs, check local Article 4 directions before buying.
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- HMRC Tax
- UK tax authority, collects income tax, CGT and stamp duty.
- Her Majesty's Revenue and Customs. Self-Assessment is due by 31 January each year for rental income earned in the prior tax year (6 April – 5 April). Non-resident landlords can register under the NRL scheme to receive rent gross rather than have it withheld.
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I
- How many times the rent covers the mortgage interest.
- Lenders stress-test BTL applications using ICR, typically requiring rent to cover 125% (basic-rate taxpayer) or 145% (higher-rate or limited company) of monthly interest at a stressed rate of 5.5% or higher. Limits how much you can borrow.
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L
- Leasehold Ownership
- Ownership for a fixed term (usually 125–999 years) from a freeholder.
- Most UK apartments are leasehold. You own the flat but the building and land are owned by a freeholder. Short leases (under 80 years) are problematic, lender restrictions, high extension costs. Always check remaining lease length before buying.
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- The share of a property financed with a mortgage.
- Calculated as: loan amount ÷ property value × 100. Most UK BTL mortgages max at 75% LTV, meaning you need a 25% deposit. Lower LTV usually means better rates. Specialist products go to 80–85% for portfolio landlords.
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M
- The minimum EPC rating for rental properties.
- Currently E or above for both new lets and existing tenancies. Proposed increases to C by 2028 for new lets, 2030 for existing. Non-compliance carries fines up to £30,000 per property.
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N
- Net yield Investment
- Yield after voids and running costs, before mortgage and tax.
- Calculated as: (annual rent − annual costs) ÷ property price × 100. Costs include service charge, ground rent, insurance, management fees, maintenance allowance and void allowance. Mortgage interest and tax are modelled separately.
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- NHBC Investment
- The UK's leading new-home 10-year warranty provider.
- NHBC (National House Building Council) warranties cover structural defects for 10 years after completion. Alternatives include Buildzone, Premier Guarantee and ICW. Check the warranty provider on any off-plan purchase, some lenders only accept certain schemes.
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O
- Off-plan Investment
- Buying a property before it's built.
- Off-plan investment locks in today's price for a future-completion property, typically delivering 8–15% capital uplift during construction. Staged payments (5–10% reservation, balance at completion) suit investors with structured capital.
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P
- Student housing built and operated professionally.
- PBSA typically offers 6–8% net yields with full hands-off management by specialist operators (Loc8me, Unite, Fresh). Studios £60–£120k in regional cities, often sold with rental guarantees for years 1–2.
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- Peppercorn rent Ownership
- A nominal or zero ground rent.
- Since June 2022 all new-build leasehold flats in England must be sold with a peppercorn (zero) ground rent under the Leasehold Reform Act. Older stock may carry onerous escalating ground rents, avoid these.
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R
- Rental cover Finance
- The ratio lenders require between rent and mortgage interest.
- See ICR. Lenders test applications assuming higher future rates to ensure rent would still cover the mortgage. Low rental cover is the single most common reason BTL applications are declined.
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- RICS Market
- UK professional body for surveyors and valuers.
- Royal Institution of Chartered Surveyors. RICS-qualified surveyors issue formal valuations accepted by lenders. Independent RICS valuations should be commissioned on any resale purchase above £250k.
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S
- Tax on property purchases in England and Northern Ireland.
- BTL and second homes pay a 3% surcharge above standard residential SDLT rates. Non-UK residents pay an additional 2% surcharge. Scotland (LBTT) and Wales (LTT) operate on separate scales. Multiple Dwellings Relief can reduce the rate when buying 2+ properties in one transaction.
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- Section 21 Lettings
- The no-fault eviction notice used by landlords, being abolished.
- Historically landlords could end an AST by serving a Section 21 notice without reason. The Renters Reform Bill 2025 abolishes Section 21 for all tenancies. Landlords now rely on Section 8 grounds-based possession.
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- Section 24 Tax
- Tax change that caps mortgage-interest relief for personal-name landlords.
- Since 2020 personal-name landlords cannot deduct mortgage interest as an expense, instead receiving a basic-rate (20%) tax credit. Higher-rate taxpayers are materially worse off. Limited-company ownership is unaffected, one of the main drivers of incorporation.
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- Section 8 Lettings
- Grounds-based possession notice for breach of tenancy.
- Used when a tenant has breached the tenancy, most commonly rent arrears (Ground 8 after 2 months unpaid) or anti-social behaviour. Typically 2-week notice period for mandatory grounds. Requires court application if tenant doesn't leave.
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- Service charge Lettings
- Annual fee to cover shared-area maintenance in apartment buildings.
- Typically £1,500–£4,000 per year for new-build city-centre apartments. Covers lift, concierge, gym, insurance, cleaning. Check the service-charge budget before buying, 5-year service charge trend is a strong quality indicator.
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- A pension wrapper allowing personal control over investments.
- Residential property can't be held in a SIPP without a 70%+ tax charge. However, commercial property, offices, care homes, PBSA (in some cases), can be. A specialist area, seek tax advice.
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- A limited company set up specifically to hold property.
- SPVs (usually a Ltd company with SIC codes 68100, 68209, 68320) offer tax advantages for higher-rate taxpayers and portfolio landlords, full mortgage-interest deduction, 19/25% corporation tax on profits, easier inheritance planning. Setup costs £15–40 via an accountant; incorporation of existing portfolios more complex.
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- Stress test Finance
- How lenders check an applicant could afford higher rates.
- Lenders stress-test BTL applications at 5.5% or higher (even if the actual rate is 4%) to ensure rent would cover repayments if rates rose. This is what determines how much you can borrow more than the headline rate.
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T
- Government-backed schemes that hold tenant deposits.
- Landlords must protect tenant deposits in a TDP scheme (DPS, MyDeposits or TDS) within 30 days of receipt. Non-compliance attracts penalties of 1–3× the deposit and blocks Section 21 use.
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- Tenant in Situ Lettings
- A property sold with an existing tenant in place.
- Buying tenant-in-situ means you inherit the existing tenancy and rent from day one. No void period, no re-let costs, but you can't vet the tenant yourself. Always request rent history, referencing documentation and deposit protection certificate before exchange.
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V
- Void Lettings
- Period when a property is empty between tenancies.
- Plan for 2–4 weeks of voids per year on most BTL investments. Higher in rural or weak letting markets, lower in core city-centre postcodes. Voids are the single biggest hidden cost first-time landlords under-budget for.
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Y
- Yield Investment
- Annual rental return expressed as a percentage of property value.
- See Gross yield and Net yield. When agents quote 'yield' they almost always mean gross. Always ask: 'Is that gross or net, and what assumptions have you used for voids and costs?'
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