The tax framework for landlords in the United Kingdom is set to tighten noticeably. As Chancellor John Healey announced, income tax on rental earnings will be increased by a further two percentage points from April 2027. Following this adjustment, the corresponding basic rate of tax on income from letting will climb to 24 per cent in future.
Criticism and warnings from the property sector
The announcement immediately triggered concern among industry associations. Representatives of the property industry warn of the tangible consequences that this fiscal measure could entail for the entire housing sector. Central to the criticism is the argument that property owners are already facing steadily mounting cost pressures.
According to leading industry representatives, the planned tax increase will inevitably lead to further rises in rents. When landlords are burdened with additional state levies, many owners feel compelled to pass these additional outgoings on to tenants through rental prices to ensure ongoing operations remain economically viable.
Fears over a shortage of housing
Alongside price rises, industry organisations fear a contraction in supply across the rental market. Given declining net yields, landlords could increasingly withdraw from the market or hold back on investing in rental housing stock, further intensifying the pressure on people seeking homes.
- —Increase in the tax rate on rental earnings by two percentage points from April 2027
- —Rise in the basic rate of tax on rental income to 24 per cent
- —Warnings of rising rents as a result of growing cost pressures
- —Threat of a reduced supply of rental housing due to landlords withdrawing from the market
Market participants are looking ahead with concern to the period before the measures take effect in spring 2027. Should the tax burden rise as announced, this could place lasting strain on the already fragile balance between supply and demand in the private rented sector.
