The government is to raise property income tax rates from April 2027.
The Chancellor stated, "Currently, a landlord with an income of £25,000 will pay nearly £1,200 less in tax than their tenant with the same salary, because no national insurance is charged on property, pension, or savings income."
The basic, higher and additional rates would each increase by 2%, moving to 22%, 42% and 47%. According to the forecast, the proposed change is expected to raise an average of around £0.5bn a year from 2028 to 2029.
The OBR reported a modest negative effect from a portion of the higher taxes being passed through into rents and property tax receipts. However, it stated this would be more than offset by downward pressure on house prices, which would reduce other areas of tax revenue.
The organisation also claimed: “The measures announced in this Budget reduce returns to private landlords, following various measures over the past 10 years that have also reduced returns.” It added that the continued reduction of landlord returns is likely to have long-term implications. The forecast explained that this gradual shift could reduce rental supply over time, “risk[ing] a steady long-term rise in rents if demand outstrips supply.”
Paul Adams, Sales Director at Pepper Money, said, “The rise in property income tax could be the final straw for many private landlords. The increased level of financial strain makes operating margins increasingly fragile for those investing in the private rented sector. Recent policy shifts, including changes to capital gains tax and the introduction of the Renters’ Rights Act, have already added significant pressure for landlords, with research showing that one in four are still unclear on key elements of the bill."
“This comes against a wider backdrop of financial vulnerability, with our 2025 Specialist Lending Study showing 37% of adults have experienced financial stress in the last three years, further intensifying demand for stable and affordable rental homes. Today's confirmed tax rate represents yet another burden, heightening the likelihood of more landlords selling up, reducing supply and destabilising the market."
“With fewer landlords willing or able to remain in the sector, supply tightens and rental affordability comes under further pressure. This is happening at a time when 4.5 million would-be homeowners say they expect to be in a financial position to purchase a property in the next three years, yet affordability remains precarious. Introducing an increased tax on rental income risks amplifying these pressures and could further unsettle the private rented sector, ultimately affecting both landlords already under strain and the tenants who depend on the stability of available rental homes.”
