UK budget introduces 4% surcharge on landlords' rental income tax
From April 2026, landlords will pay an additional 4% surcharge on income tax for rental income, raising rates for basic, higher and top taxpayers, while the Office for Budget Responsibility warns the change could reduce returns and increase rents.
The 2026 UK budget announced a 4% surcharge on income tax for rental income that will take effect in April next year. The measure raises the effective tax rate to 24% for basic-rate taxpayers and to 44% and 49% for higher- and top-rate taxpayers respectively. The surcharge applies across England, Wales and Northern Ireland under the Finance Bill 2026-27.
The Office for Budget Responsibility said the changes are likely to lead to a material reduction in returns for private landlords and could push rents higher by reducing supply and encouraging landlords to pass 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 lower 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 cause a steady rise in rents through two channels: fewer potential landlords entering the market, and existing landlords passing higher costs to tenants. The budget also left in place a freeze on Local Housing Allowance, which the NRLA said continues to affect local authorities and efforts to address homelessness.