Budget 2026: Tax raid on landlords ‘final nail in the coffin’ for rental sector
John Healey’s decision to push up tax on rental income is set to push up rents and deter new landlords from entering the sector. The Chancellor said in the Budget that tax on property income will rise by a further two per cent, following the two per cent hike imposed by his predecessor, Rachel Reeves, [...]
The UK government's decision to increase tax on rental income is expected to have significant consequences for the rental sector and its tenants, according to critics. Chancellor John Healey's announcement, part of the 2026 Budget, will raise the tax on property income by an additional two percent, following a two percent increase imposed last year by former Chancellor Rachel Reeves.
The Office for Budget Responsibility (OBR), the independent fiscal watchdog, has warned that this tax hike could lead to a steady rise in rents due to two primary factors. Firstly, potential landlords may be less inclined to enter the rental market, reducing the overall supply of rental properties. Secondly, landlords are likely to pass on more of these costs to tenants in the long run.
This tax increase will affect only 16 percent of income taxpayers, with half of the revenue generated expected to come from the top 10 percent of households. However, the OBR has cautioned that the tax hike may still be the final nail in the coffin for an already struggling rental sector. Estate agents and landlords have reacted with strong disapproval, with some warning that the government is actively working to dismantle the rental market.
Critics argue that the sector has already faced numerous challenges, including Labour's renters' rights act, and that this tax increase will only exacerbate the situation, ultimately driving up rents and reducing the availability of rental properties for tenants.
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