"Hiking taxes on rented housing will lead to higher rents. It’s not exactly clear how this approach will address the cost-of-living crisis ministers now say is the Government’s number one priority"
- Ben Beadle - NRLA
Two-thirds of landlords planning to raise rents say forthcoming tax increases are a major reason behind their decision, according to new polling.
In her recent Budget, the Chancellor announced plans to increase income tax on rental income by two percentage points from 2027. The Office for Budget Responsibility (OBR) warned the move would push rents higher.
New figures now echo that assessment. A poll of National Residential Landlords Association members by research consultancy Pegasus Insight found that among landlords intending to increase rents over the next year, 65% pointed to the tax rise as a key factor. This ranked just behind the 68% who said they needed to cover higher general running costs for their properties.
Landlords highlighted two main pressures driving rent decisions:
rising operational costs, cited by 68%
the forthcoming rental income tax increase, cited by 65%
Attention is also shifting to the legal system as the Government prepares to end ‘no explanation’ repossessions from 1st May. Court delays emerged as landlords’ leading concern, with 91% saying they were either very concerned or slightly concerned about wait times for possession cases.
Government data supports these anxieties. Courts now take an average of more than seven months to process and enforce possession cases under the system replacing Section 21. This is the longest timeframe recorded since the start of 2022.
Despite mounting pressures, demand remains strong in the rental market. Some 61% of landlords surveyed said tenant demand is now high. Even so, nearly a quarter, 24%, reported selling property over the past 12 months, compared with just 5% who said they had bought during the same period.
The imbalance between sales and purchases continues to widen. At 19 percentage points, the gap between landlords selling and those buying is more than double the level seen at the start of 2024, when it stood at eight points.
Among those who sold property in the past year, more than a quarter, 27%, did so with tenants already living in the homes.
“This research should be a wake-up call to the Government,” said Ben Beadle, chief executive of the National Residential Landlords Association. “Hiking taxes on rented housing will lead to higher rents. It’s not exactly clear how this approach will address the cost-of-living crisis ministers now say is the Government’s number one priority."
“More broadly, with no fault repossession due to end in just a matter of months, responsible landlords are seriously concerned about court backlogs. Ministers have pledged to ensure the justice system is ready to process cases where landlords have good reason. However, as of yet, they have failed to explain what ready means.
“Warm words mean nothing without a clear plan to ensure legitimate possession cases are processed and, if needed, enforced far quicker than at present.”
