Landlords urge Chancellor to avoid further tax hikes in upcoming Budget

Landlords urge Chancellor to avoid further tax hikes in upcoming Budget

New research reveals landlords’ strong concerns over rising tax rates and regulatory costs, warning that additional financial burdens could lead to increased rents and reduced rental property availability.

Landlords across the UK are expressing significant unease ahead of the Chancellor’s Budget on 28 October, with fresh data from Pegasus Insight highlighting widespread anxiety about the cumulative impact of recent tax and regulatory changes on the Private Rented Sector (PRS). The research indicates that landlords are bracing for further cost pressures, which many believe will ultimately be passed on to tenants through higher rents or more selective letting practices.

The study reveals that 88% of landlords are worried about the recent 2% increase in income tax on rental income from personally held properties, marking a rise in concern compared to previous quarters. This heightened apprehension reflects the growing financial strain on landlords, who are already managing a complex and evolving regulatory environment.

Research findings on landlord responses and tenant impact

According to Pegasus Insight, nearly two-thirds of landlords (64%) intend to recoup increased tax costs by raising rents, while a substantial 83% agree that the combination of tax and regulatory changes will make them more cautious about the tenants they accept. This selectivity could reduce access to rental homes for some prospective tenants, potentially exacerbating housing availability issues.

The research also highlights landlords’ worries about the practical operation of the Renters’ Rights Act, which came into force recently. A striking 91% of landlords surveyed expressed serious concern about potential court delays when seeking possession of their properties, a factor that could complicate managing tenancies and enforcing rights.

Previous Pegasus Insight research has shown that landlords often respond to tax and regulatory pressures by selling properties, incorporating their holdings, or postponing investment in new rental stock. The current findings suggest that further tax increases in the upcoming Budget could accelerate these trends, with implications not only for landlords but also for tenants and the overall rental market.

Context of rising rents and affordability challenges

Tenant Trends research from Pegasus Insight complements these findings by showing that renters are already aware of the potential for increased landlord costs to translate into higher rents. Over a quarter of tenants expect rents to rise due to compliance costs associated with the Renters’ Rights Act, while only 9% anticipate any reduction in rents.

The affordability challenge for tenants is underscored by data indicating that the typical monthly rent is now £917, an 11% increase compared to the previous year. Nearly half of tenants who have remained in the same property for over a year have experienced rent increases during that period, adding pressure on household budgets.

These figures frame the current debate over taxation and regulation in the PRS, with landlords warning that further fiscal pressures could worsen affordability and reduce the supply of rental homes.

Implications for landlords and the rental sector

The Pegasus Insight report, as commented on by Mark Long, founder and director of Pegasus Insight, stresses the need for stability in the PRS. Landlords are preparing for substantial changes under the Renters’ Rights Act, and the prospect of additional tax burdens threatens to compound uncertainty.

Long emphasises that the effectiveness of the new possession regime under the Renters’ Rights Act depends heavily on a court system capable of handling cases efficiently. Ensuring sufficient court capacity should be a priority to avoid backlogs that could hinder landlords’ ability to manage their properties effectively.

For landlords, the combined pressures of increased taxation, regulatory compliance costs, and operational challenges in possession proceedings may necessitate revisiting rent-setting strategies and tenant selection criteria. The potential for higher void periods and reduced investment in rental properties could also emerge if landlords choose to exit the market or delay acquisitions.

What landlords should consider now

Landlords should review their current rental income and expenditure carefully in light of the increased income tax rates and compliance costs associated with the Renters’ Rights Act. Monitoring how these changes affect cash flow and profitability will be essential to making informed decisions about rent levels and property management.

Given the concerns about court delays in possession cases, landlords should ensure they understand the new possession procedures and maintain thorough records to support any future claims. Staying informed about updates to the Renters’ Rights Act and related guidance will be crucial for compliance and risk management.

Landlords may also want to assess their tenant vetting processes to balance the need for reliable tenants with fair access to housing, as increased selectivity could have reputational and ethical implications.

Keeping your rental properties compliant

TLA membership provides landlords and letting agents with practical compliance resources and up-to-date information on regulatory changes such as the Renters’ Rights Act. Through TLA’s new property management and compliance platform, ORBIT, currently available in BETA testing, members can organise property records, manage rental documents, and access relevant compliance materials. ORBIT’s features in testing include tools for recording repairs, inspections, and communications, helping landlords maintain evidence of compliance and prepare for new obligations. Exploring TLA membership and ORBIT BETA access can support landlords in navigating the evolving regulatory environment with greater confidence and organisation.

Looking ahead, the Budget’s decisions will be closely watched by landlords and tenants alike. The sector’s response to any new tax measures will shape rental affordability and availability in the months to come.

Sources: Landlord Today