Landlords face rising income tax rates on rental income from April 2027, a change expected to push rents higher amid ongoing cost of living pressures. The National Residential Landlords Association (NRLA) warns that nearly half of landlords plan rent increases in response to these tax hikes, with some considering selling properties.

Tax rises set to impact rental market

The NRLA’s recent survey reveals that 46% of landlords intend to raise rents within the next year due to upcoming tax changes. From April 2027, income tax rates on property income will increase by two percentage points, following announcements made in last autumn’s Budget.

Additionally, 35% of landlords say they plan to increase rents by more than previously anticipated, while 33% are considering selling one or more properties as a direct consequence of the tax rise. This signals a potential contraction in rental supply alongside increased costs for tenants.

Government urged to reconsider policy

Ben Beadle, chief executive of the NRLA, criticised the government’s approach, stating: “If the government is serious about easing cost of living pressures, it needs to look in the mirror.” He highlighted the contradiction of increasing the cost of providing rental housing while housing benefit support remains frozen.

Beadle warned that renters will ultimately bear the burden of the Chancellor’s tax increases. He called on the government to scrap plans that risk pushing rents higher and making it more difficult for people to secure housing.

He also addressed proposals for rent controls, emphasising that such measures fail to tackle the fundamental causes of rising rents: “rising costs and a chronic shortage of homes to meet demand.”

Official warnings and housing benefit concerns

The Office for Budget Responsibility has previously cautioned that these tax policies would lead to higher rents. Housing Minister Matthew Pennycook recently acknowledged that tax increases introduced by the previous government were a key factor driving landlords to sell properties.

The NRLA notes that landlord taxes have continued to increase under the current government, compounding pressures on the rental sector. Meanwhile, housing benefit remains frozen, tightening budgets for tenants reliant on support and making it harder for them to maintain tenancies.

The Institute for Fiscal Studies has criticised the government’s fiscal stance, stating it is “no excuse for a system that creates uncertainty for renters and unfairness between local areas.”

What this means for landlords

Landlords should prepare for the financial impact of higher income tax rates on rental income and consider how this may affect their portfolio decisions. The prospect of rent increases may be necessary to offset rising costs, but it also risks reducing tenant affordability and increasing void periods.

Those landlords contemplating selling properties should weigh the long-term implications for rental supply and market stability. The NRLA’s findings suggest a significant portion of landlords may exit the market, potentially exacerbating housing shortages and placing further upward pressure on rents.

Engagement with government consultations and advocacy through landlord associations will be crucial to influence future policy and support measures that balance taxation with housing availability and affordability.

Source: Based on reporting from Property118

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