Property commentators have criticised the chancellor’s latest tax increase on rental income, warning that the move could drive more landlords out of the private rented sector and leave tenants facing higher rents.
Estate agents, tax specialists and property analysts have questioned the government’s decision to impose further costs on buy-to-let investors at a time when rental supply remains under pressure.
Several warn that landlords could respond by selling properties, raising rents where possible or moving their money into other investments.
Darrell Evans, chief commercial officer at Lomond, said the announcement had caught the lettings industry by surprise.
“For landlords and property investors, there is a sting in the tail of this Budget. A further two-point rise in tax on rental income, on top of the increase announced last year, means individual landlords will pay 24%, 44% or 49% from April 2027.
“Following a period of unprecedented regulatory reform, what the lettings market needed was stability. Instead, this has taken the industry by surprise, and it is tenants who are likely to feel it most if fewer homes come to market.”
Evans urged landlords to consult tax advisers and letting agents before making decisions about their portfolios.
Amy Fry, partner and property expert at Menzies LLP, warned that the changes could make highly mortgaged rental properties increasingly unattractive.
“Landlords have taken the biggest direct hit in this Budget, with higher tax on rental income cutting post-tax returns on personally held lets and making highly geared portfolios far less attractive. Moving homes into a company may tempt some, but incorporating can trigger capital gains tax and stamp duty, and getting money back out of a company brings problems of its own.”
Fry said some investors could dispose of lower-yielding properties, while others may increase rents where the market allows.
Madeline Gowlett, tax partner at Travers Smith, suggested that landlords could increasingly look beyond property for investment returns.
“The Chancellor has once again increased the tax rate on income from savings and properties by 2%, so rent will now be taxed at 4% above normal marginal rates. This could see more landlords sell up and look to invest in other asset classes (share dividends for example have not had the same hit)”.
Marcus Dixon, UK head of living and residential research at JLL, said the tax increase risked undermining confidence among existing buy-to-let investors.
“The further 2 percentage point rise in income tax on property income from April 2027 comes on top of last year’s announced increase. It only adds to a pattern of rising costs that has been weighing on buy-to-let landlords for some time and will undoubtedly lead some to further question their future in the sector, during a time when demand for rented homes continues to increase.”
Philip Boyden, managing director of Boydens, accused the government of placing a disproportionate burden on private landlords.
“The Budget disproportionately squeezes private landlords while offering narrow, restricted interventions for prospective homebuyers.”
He warned that the higher tax burden, combined with the Renters’ Rights Act, could push up rents and encourage further landlord exits.
Boyden also questioned whether the government’s first-time buyer measures would provide enough support for the wider housing market.
Meanwhile, Paul Buck, Boydens’ director of sales and lettings, called for measures to improve transaction activity.
“We wanted more practical help to keep people moving with faster progress on the buying and selling process.
“There also needs to be more measured stamp duty help, support for downsizing and clear grant access for 2030 EPC energy-efficiency upgrades.”
The common concern among industry commentators is that further taxation could discourage investment in privately rented homes, with tenants potentially bearing some of the consequences through reduced choice and higher rents.
