UK budget squeezes landlords with 4% surcharge on rental income tax
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From April 2026, landlords will face an extra 4% surcharge on tax paid on rental income, pushing rates up for basic, higher and top taxpayers, while the Office for Budget Responsibility says the move may cut returns and drive rents higher.
The 2026 UK budget unveiled a 4% surcharge on income tax for rental income, due to come into force in April next year. The policy lifts the effective tax rate to 24% for basic-rate taxpayers and to 44% and 49% for higher- and top-rate taxpayers respectively. The surcharge will apply across England, Wales and Northern Ireland under the Finance Bill 2026-27.
The Office for Budget Responsibility said the changes are likely to cause a material drop in returns for private landlords and could push rents higher by squeezing supply and prompting landlords to shift costs onto tenants.
"The Chancellor has today made life harder for renters right across the country," NRLA chief executive Ben Beadle said, adding that higher taxes are expected to increase rents and reduce supply when demand already exceeds available homes.
"The Chancellor is yet again trying to balance the books on the backs of landlords. He should be taking decisions that could boost the supply of homes, reduce rents for tenants and support growth," Beadle continued.
The OBR warned that the measures could drive rents upward in a steady way through two channels: fewer would-be landlords entering the market, and existing landlords passing higher costs on to tenants. The budget also kept in place a freeze on Local Housing Allowance, which the NRLA said continues to hit local authorities and undermine efforts to address homelessness.