UK Chancellor announces additional 2% tax rise on rental income

Chancellor John Healey said that from April landlords will pay an extra two percentage points on rental income, increasing the basic rate to 24% and raising the higher and additional rates from 40% to 44% and from 45% to 49% respectively. The Treasury noted that the change is part of a broader budget measure that raises tax on savings and property income across all bands by two points from April 2027, describing the approach as "fair and proportionate" and stating that 84% of income-tax payers will be unaffected.

"The Government is keeping the rates of tax paid on earnings unchanged, while seeking an additional contribution from those with taxable income from assets," the Treasury said.

Industry representatives expressed concern about the impact on the rental market. Ben Beadle, chief executive of the National Residential Landlords Association, warned that the tax increase could raise rents and reduce supply. Timothy Douglas, head of policy and campaigns at Propertymark, described the rise as a disincentive for current and prospective landlords and cautioned that it may lead to higher rents for tenants. Steve Cox, chief commercial officer at Fleet Mortgages, suggested the higher rates might prompt landlords with larger portfolios to reconsider ownership structures, noting a recent shift toward individual borrowing in the buy-to-let market.

Landlord advocacy group Landlord Action founder Paul Shamplina questioned the cumulative effect of successive tax hikes and regulatory changes on the sector, emphasizing the reliance on private landlords to provide homes for millions of tenants.