Landlords Gerard Boon, 30, and Neil France, 68, are both going to be hit hard by the rise in property income tax announced
Landlords like Gerard Boon say they are weighing up selling their properties after the Government confirmed it will raise property income tax in the Budget.
From April 2027, landlords will have to pay an additional two percentage points on rental income, a move that will be likely to push more out of the market – especially as many are already concerned about the impact of the Renters Reform Bill.
The Office for Budget Responsibility (OBR) has warned the move will hit landlords’ profitability and push rents higher, with basic, higher and additional rates due to increase to 22 per cent, 42 per cent and 47 per cent.
The change could add between £20 and £25 a month to typical rents in England, according to The National Residential Landlords Association, compounding the effects of recent stamp duty reforms and cuts to mortgage interest relief.
For Gerard, who owns a student rental property in Norwich valued at about £315,000, the rise has “cemented” his decision to exit the market.
Speaking to The i Paper, the 30-year-old said: “I fear that many smaller landlords will make the same decision, as landlords are clearly being targeted by the Government for ideological reasons.
“Unfortunately, I believe this will ultimately harm tenants far more than it does the landlords paying the tax.”
He believes other forms of investment now offer better returns, and fears landlords will face further tax rises over the coming years under the Labour Government.
In its report the OBR said: “The measures announced in this Budget reduce returns to private landlords, following various measures over the past 10 years that have also reduced returns.
“This successive eroding of private landlord returns will likely reduce the supply of rental property over the longer run. This risks a steady long-term rise in rents if demand outstrips supply.”
Gerard, a broker who became a landlord in 2022 after saving to buy his first property, currently charges £2,400 a month in rent.
He said: “The tax rise on property income was disappointing news, but not surprising given the Government’s sentiment towards landlords.
“The change is likely to damage the UK’s rental market further by forcing landlords to increase rents for tenants.
“I know many landlords personally and the majority are struggling to profit from their properties.
“By adding further costs to them, they will need to pass this cost on to tenants as a necessity to retain the property.”
Ben Beadle, chief executive of the National Residential Landlords Association, said almost one million new rental homes will be required by 2031.
Yet he warned: “This Budget will clobber tenants with higher costs while doing nothing to improve access to the homes people need.”
Not all landlords intend to sell. Neil France, who became an accidental landlord in 2009 when his wife’s aunt went into care and they bought her home, plans instead to hand the management of his portfolio to a third party.
The 68-year-old, from Essex, owns three HMOs in Chelmsford and four family homes on the Wirral, worth a combined £2m.
He said he was unsurprised by the tax rise but will still need to raise rents as “the margins are already tight”.
Neil added: “We have decided not to immediately sell up but have made arrangements to outsource their management and live in South Africa.
“The rents will need to increase in line with the actual cost increases we are facing.”