Property income taxes will rise by 2% from April 2027, bringing the rate to 22%, 42% and 47% for basic, higher and additional rate taxpayers respectively.
Reaction
William Reeve, chief executive, Goodlord, said: “The 2% tax hike… risks leaving renters facing the prospect of rent hikes as the landlords that remain aim to cover their losses.
“This was already something a large section of landlords were considering in response to the Renters’ Rights Act, so this could compound the threat of rental cost rises for tenants and contribute to higher inflation.”
Emma Cox, managing director of real estate at Shawbrook, said: “While the government has announced a 2% tax increase in property income, most professional landlords operating via a limited company will be breathing a sigh of relief that rumoured, punitive changes were not announced.
“Though economic uncertainty and market volatility have posed challenges over the past 12 months, landlords have proven themselves to be agile and able to withstand pressures.
“While house prices continue to fluctuate, the promise of accelerated housebuilding and the lack of additional taxes will encourage professional landlords to seek further opportunities and add to their portfolios over the coming months.
“Continuing to diversify property types, shifting towards assets such as semi-commercial property and HMOs, will continue to be an effective strategy for those looking to maximise yields and ensure their businesses are robust against any sudden market changes.”
John Angus is managing director at Switch Management, a property management company that provides housing to vulnerable families.
He said: “For landlords, this represents another significant increase in the tax burden at a time when the sector is already under strain.
“Many landlords were already reconsidering their position following the Renters’ Rights Act. This additional tax burden risks making continued investment unviable for some, accelerating market exits just as demand intensifies.
Lee Murphy, managing director of The Accountancy Partnership, said: “It was something that had been predicted for a while, but the announcement from Reeves that investment income will now be taxed more heavily than wages will mean that property investors will face a huge shift in landscape.
“This change will increase the cost of holding and profiting from a property, and many landlords will need to review their portfolios and consider restructuring to remain tax-efficient.
“It’s another clear signal that the government is prioritising earned income over passive returns, which is likely going to dampen investor appetite in the property market.”
Mark Hughes, specialist property expert at Pure Property Finance, said: “Reeves introducing this new approach risks discouraging property investment, reducing rental supply and could potentially drive up huge costs for tenants.
“Many landlords are already facing rising interest rates and compliance burdens, and this additional tax pressure could force them into leaving the market.
“Property investment underpins housing stability and long-term wealth creation, whereas penalisation undermines both. A balanced tax system should encourage growth, not push out those that’re going to provide homes and support the wider economy.”
Matt Hutchinson, director of flatshare site SpareRoom, said: “It’s right to want to level the playing field but there’s a knock-on effect that hasn’t been thought through. There’s a very real risk landlords facing reduced profit margins will pass this on to tenants by increasing rents, which are already at record highs.
“For landlords, who are already grappling with what the Renters’ Rights Act means for them, this could well be the straw that breaks the camel’s back, pushing more to leave the market at a time when we desperately need rental stock.
“Driving landlords out the sector in the middle of a supply crisis that’s keeping rents unaffordably high helps no-one, least of all renters.
“Tenants have no protections from market volatility and too many people spend 40-50% of their income on rent. People can’t take much more. To do this now could be terrible timing when the rental market is already in such a state of flux.”