A financial institution has cautioned that tenants could face a “double blow” of rent rises if landlords become liable for national insurance on their rental income.
With the Autumn Budget only eight weeks away, speculation is growing that Chancellor Rachel Reeves may introduce national insurance on rental earnings and replace stamp duty with a new property tax for homes valued above £500,000. Coventry Building Society has warned that such measures would ultimately impact tenants.
The lender also expressed concern that proposed property tax reforms could make it more difficult for first-time buyers to get on the housing ladder.
Create a double whammy of rent increases for tenants
Jonathan Stinton, head of intermediary relationships at Coventry Building Society, warned that applying National Insurance to rental income could lead to a “double hit” of rent rises for tenants. He explained that many landlords may feel forced to either increase rents to cover the extra cost or sell their properties altogether.
While landlords selling up could open more doors for aspiring homeowners, Stinton noted that it could also make life tougher for those still saving for a deposit. A smaller supply of rental homes would likely drive rents even higher, making it harder for tenants to save.
He also pointed out that with the Renters’ Rights Bill approaching, some landlords might choose to raise rents in advance of the new regulations. This, he added, would make saving for a first home even more challenging for many would-be buyers.
A hollow victory
Mr Stinton also shared his views on the recent reports suggesting that stamp duty could be scrapped for buyers and replaced with a new property tax imposed on sellers of homes worth more than £500,000. He warned that while the idea might sound attractive at first, it could ultimately harm first-time buyers rather than help them.
He explained that the proposal to shift the tax responsibility from buyers to sellers could be seen as a positive step for those struggling to get on the property ladder. Removing the large upfront stamp duty payment would certainly make purchasing a home appear more affordable. However, he stressed that this benefit might prove to be short-lived if it leads to fewer homes being put up for sale.
According to Stinton, if homeowners at the upper end of the market are faced with larger tax bills when they sell, many might decide to stay in their current properties rather than move. This could have a knock-on effect throughout the housing market, leading to fewer family-sized homes being listed for sale and reducing the availability of smaller, more affordable properties for first-time buyers.
The resulting shortage of homes could mean that, although the initial buying costs would be lower, finding a suitable home would become much more difficult. Stinton pointed out that this scenario could create a new kind of obstacle for buyers — one where affordability improves on paper but opportunities to purchase diminish in practice.
He also highlighted that limited housing supply often drives up prices, which could cancel out any financial advantage gained from removing stamp duty for buyers. If demand continues to exceed supply, property prices could climb higher, leaving many first-time buyers still struggling to secure a home within their budget.
In addition, Stinton commented on speculation that buyers could soon be given the option to pay stamp duty in instalments rather than upfront. While this might seem like a practical solution to ease immediate financial pressure, he cautioned that it could also introduce new affordability challenges in the long term.
Allowing instalment payments would effectively turn stamp duty into another recurring cost, similar to a loan repayment or monthly bill. For first-time buyers already balancing mortgage payments, utility bills, and everyday expenses, adding yet another financial commitment could make managing household budgets even more difficult.
Stinton suggested that policymakers should consider the wider implications of such reforms before implementing them. He emphasised the importance of maintaining a balanced property market that supports both buyers and sellers, rather than creating new barriers for those trying to enter the market for the first time.
He also noted that any significant change to property taxation would likely affect the behaviour of both buyers and sellers. For example, those looking to move up the property ladder might delay their decisions, waiting for greater clarity on the new system. This hesitation could lead to slower market activity, reducing housing availability and impacting overall economic growth.
Furthermore, Stinton warned that introducing a property tax on sellers could discourage investment in larger homes, especially in areas where property values are already high. This could result in fewer high-value properties being circulated in the market, further contributing to reduced mobility and a stagnating housing supply.
He added that the government should focus on policies that promote long-term housing affordability rather than short-term relief measures. Initiatives to boost housing construction, support affordable rental schemes, and encourage responsible lending would have a more meaningful impact on helping people secure homes.
Stinton concluded that while the concept of removing stamp duty for buyers may appear helpful on the surface, without careful consideration and balanced implementation, it could produce the opposite effect — making it even harder for first-time buyers to find a suitable property.
He reiterated that the government’s housing policy should prioritise accessibility and supply rather than simply shifting where and when taxes are paid. True progress, he suggested, lies in addressing the root issues of housing shortage and affordability, not in rearranging the costs.
Ultimately, Stinton’s message was clear: meaningful housing reform must look beyond short-term political wins and focus instead on creating a sustainable, fair, and accessible property market that works for everyone — especially those striving to buy their first home.
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