Property experts are expecting an “exodus” of landlords, denting housing supply and pushing up rents, after Chancellor Rachel Reeves’ tax-hiking Budget targeted their income.
Today’s Budget is being seen as “yet another blow for property investors” after it was announced property income will be taxed at higher rates and a new ‘mansion tax’ will apply to higher value homes.
One broker said: “The private rented sector is turning into a dirty carpet that is just beaten time and time again.”
The Budget announcement revealed that from April 2027, there will be a 2% increase to the basic, higher and additional rates of property income tax, increasing them to 22%, 42% and 47% respectively.
Elsewhere in her speech, the Chancellor revealed a new council tax surcharge on properties valued above £2 million will take effect from the 2028/29 tax year.
This is combined with the increase in capital gains tax rates at the 2024 Autumn Budget, the cut of the annual exempt amount by the previous government, and, outside tax matters, the policies contained in the Renters’ Rights Bill.
Property investors being “battered”
Jack Tutton, Director at Fareham-based SJ Mortgages, said: “Successive governments have continued to batter property investors with constant increases in tax and adding further costs with new policies, making it harder for landlords to justify their investment.
“Without people willing to invest into property, there simply will not be enough property available for people to rent and that will only drive up rents further. The government has sold off huge amounts of property through the ‘right to buy scheme’, without ever replacing it which compounds the issue.
“This further increase announced today will result in one of two things, either landlords having to increase rents or selling up. Neither of which is good for tenants.”
Michelle Lawson, Director at Fareham-based Lawson Financial, cut straight to the chase: “This is another landlord onslaught that will only impact some of the most vulnerable in society.”
She continued: “Landlords will have no option but to pass the costs on via higher rents. The private rented sector is turning into a dirty carpet that is just beaten time and time again.”
Tenants will bear the cost
Harps Garcha, Director at London-based Brooklyns Financial, said: “Ultimately, it’s tenants who will bear the cost of any rise in taxes paid by landlord’s income.
With the Renters’ Reform measures now in place and already making the market more challenging, the sector is becoming increasingly unattractive for landlords. Unfortunately, this shift will only have negative consequences for working people and those relying on benefits.”
Scott Gallacher, Director at Leicester-based Rowley Turton, said: “This Budget is yet another blow for property investors. With higher interest rates, rising taxes and ever-more burdensome legislation, property is becoming increasingly uninvestable for many.
“For small landlords in particular, the pressure is intense. Their costs are rising across the board, yet their ability to exit is constrained by some of the harshest capital gains tax burdens we’ve seen in years. Many feel trapped – punished if they stay, and punished if they try to leave.”
Tenants won’t escape the fallout either, he said, when landlords’ costs rise this sharply.
He added: “Some of those pressures inevitably feed through into higher rents. The result is a market that works neither for responsible landlords nor for the renters who rely on them.”
Craig Fish, Director at London-based Lodestone Mortgages, agreed: “Property investors may well have been hit in this Budget, but ultimately it’s the tenants who will pay for it. Less supply and increased rents will be just a couple of the outcomes. Rachel sadly doesn’t understand the consequences of her actions.”
Cheesed off
Aaron Strutt, Product and Communications Director at London-based Trinity Financial , added: “Lots of landlords will be pretty cheesed off that they have to pay more tax, but they have been expecting this for a while.
“This tax may well mean even more previously rented out properties are put on the market, which in turn pushes up rents in many areas even more.”
Patricia McGirr, Founder at Burnley-based Repossession Rescue Network, said that the numbers, for many landlords, simply will no longer stack up: “This Budget sends a blunt message. Small landlords are expected to hold the rental market together while being taxed from every direction. Higher property income tax, higher CGT and a new surcharge turn viability into a coin toss.
“For many, the numbers simply stop working. Some will exit. Others will pass on costs just to stay afloat. Renters lose either way. If the Government wants a stable rental sector, it cannot keep draining the people who provide the homes. This set of measures does exactly that.”
Photo by Junseong Lee on Unsplash
