By Ahmed Abdelsalam
Tenants face higher rents after Chancellor John Healey announced a further two percentage point tax increase on rental income from April, building on an identical rise set by his predecessor Rachel Reeves last year. The combined surcharge will reach four points by April 2027, prompting warnings that the measure will worsen the cost of living for renters.
Tax increase details
The Autumn Budget confirms that property income will be taxed at a higher rate, adding to existing pressures. The Office for Budget Responsibility (OBR) said the increased burden, alongside other housing policies, will reduce rental supply and push up prices. Current forecasts already predict a four per cent rent rise over the next year, adding £700 to the average annual tenant bill.
Landlord response warnings
The National Residential Landlords Association (NRLA) said the decision "made life harder for renters right across the country." Research by Pegasus Insight for the NRLA found 46 per cent of landlords planned to increase rents over the next 12 months, with 35 per cent intending to raise rents more than previously planned. A third said they would sell one or more properties.
Expert views on rent impact
Hannah Aldridge of the Resolution Foundation argued price rises are "likely to be small" because rents track earnings and landlords already charge the maximum tenants can pay. She said most of the tax rise will affect landlords' margins rather than rents, unless supply becomes more constrained. Lucian Cook of Savills noted the policy gives landlords another reason to exit or rationalise buy-to-let portfolios, squeezing supply and putting upward pressure on rental values.
Housing benefit concerns
Housing groups criticised the Budget for not addressing frozen Local Housing Allowance (LHA) rates. Resolution Foundation analysis shows the shortfall between LHA and the bottom 30 per cent of local rents hit a record 23.3 per cent, equal to £170 a month for a typical family in a two-bedroom home. Generation Rent warned the freeze traps low-income families in poverty and undermines efforts to end rough sleeping.
