Individual landlords are set to face increased tax on rental income from April 2027, following rate increases announced in this year's Autumn Budget. An additional two percentage points will be added to rental income tax, bringing the total increase to four percentage points when combined with a previously announced rise.
This cumulative increase will raise the basic property tax rate to 24%, the higher rate to 44%, and the additional rate to 49%. Wealth management group Rathbones estimates these changes could cost landlords up to an extra £1,122 in the first year alone, and potentially nearly £36,000 over 25 years.
The Office for Budget Responsibility (OBR) has warned that these tax changes could result in a 'steady rise in rents' for tenants. The OBR suggests that higher taxes might deter new landlords from entering the market and could lead some existing landlords to exit, potentially reducing the supply of rental homes.
According to a recent Propertymark survey, approximately 57% of estate agents reported inquiries from landlords considering leaving the private rental sector due to these tax hikes. Estate agency Savills forecasts that average rental costs could increase by 15% between now and 2031, with London potentially seeing a 16% rise.