Two-thirds of landlords planning to increase rents have identified Rachel Reeves’ recent tax rise as a significant factor influencing their decisions. In her latest Budget announcement, the Chancellor revealed plans to raise income tax on rental income by 2% from 2027. The Office for Budget Responsibility (OBR) has already warned that this move is likely to contribute to higher rents across the UK rental market.
New research now appears to confirm these concerns. A survey conducted by research firm Pegasus Insight, which polled members of the National Residential Landlords Association (NRLA), found that 65% of landlords intending to raise rents said the forthcoming tax increase was a direct influence on their decision. This suggests that policy changes at a national level are already having tangible effects on landlords’ financial planning.
However, tax is not the only factor putting pressure on landlords. Rising operational costs remain a major concern. Approximately 68% of respondents cited increasing property management costs as a reason for rent rises. These costs include maintenance, insurance, energy bills, compliance with regulations, and other day-to-day expenses necessary to keep rental properties in good condition.
Legal and regulatory pressures are also weighing heavily on landlords’ decisions. The abolition of Section 21 from May 1 has shifted repossession powers to Section 8, creating challenges for landlords seeking to regain possession of properties. The NRLA survey revealed that 91% of landlords were either very concerned or somewhat concerned about delays in court processing times.
Government data confirms that possession cases under the new system now take, on average, more than seven months to reach resolution. This represents the longest wait since early 2022 and creates financial strain for landlords who may be unable to recover properties quickly, particularly when tenants are in arrears or causing other problems.
Despite these challenges, the survey indicates that tenant demand remains relatively strong. Around 61% of landlords reported that demand for rental properties is high, signalling that the rental market continues to be active. Yet, market pressures are causing some landlords to reconsider their property portfolios. Over the last year, 24% of landlords reported selling properties, compared with only 5% who expanded their portfolios during the same period.
Among those who sold properties, 27% had tenants already living in the homes, highlighting the complexity of managing rental sales without disrupting occupancy. This demonstrates that landlords are navigating a balancing act between maintaining income, complying with regulations, and meeting tenants’ expectations.
NRLA chief executive Ben Beadle stressed that these findings should serve as a wake-up call to policymakers. He argued that raising taxes on rental housing is highly likely to result in higher rents for tenants, rather than alleviating financial pressures in the housing market. Beadle warned that the government’s approach may not align with its stated goal of tackling the cost-of-living crisis.
The survey also illustrates the broader financial pressures landlords face. Small and medium-sized landlords, in particular, are most vulnerable to the combined effects of higher taxes, rising operational costs, and court delays. Many are reviewing their financial strategies and exploring rent increases or adjustments in property management to maintain profitability.
Landlords are also navigating regulatory uncertainty. While the Section 8 system is intended to replace Section 21 evictions, court backlogs and inconsistent processing times make planning difficult. Some landlords have expressed concern that these delays limit their ability to manage problematic tenants effectively, creating additional risk and stress.
Moreover, rising taxation and costs may influence landlords’ long-term decisions about investing in property. Some may choose to reduce their portfolio size, sell properties, or avoid new acquisitions, potentially limiting housing supply in an already stretched rental market. This could have knock-on effects for tenants and the affordability of rental housing in certain areas.
The survey findings suggest a growing tension between government policy objectives and the realities faced by landlords. While tax increases may be designed to generate revenue or rebalance the housing sector, landlords warn that the additional burden is likely to be passed on to tenants through higher rents. This could exacerbate affordability pressures for households across the UK.
Landlords’ concerns are not limited to financial factors alone. Court delays and regulatory changes also introduce administrative challenges, increasing the complexity of property management. Many landlords are now considering measures such as higher rents, stricter tenant screening, or renegotiating tenancy agreements to mitigate the financial impact of these developments.
Overall, the research paints a picture of a rental sector under pressure. Rising taxes, increasing operational costs, and lengthy court delays are all influencing landlord decisions. While tenant demand remains strong, many landlords are being forced to adjust their strategies to cope with the combined impact of policy changes and market conditions.
Ben Beadle concluded that it is crucial for policymakers to consider the practical implications of their decisions. Any action that affects rental income can have a direct impact on tenants, housing availability, and the wider rental market. Careful consideration and support for landlords may be necessary to ensure that housing remains accessible and affordable while maintaining a healthy rental sector.
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