Rachel Reeves’s landlord tax will shrink rental supply and fuel rising rents
5 months ago | 5 comments
Government dismisses claims property tax rise will push up rents despite OBR warning
12:01 AM, 18th December 2025, 4 months ago
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The government claim the Office for Budget Responsibility (OBR) does not believe the decision in the Autumn Budget to raise property tax income will affect rents.
In answer to a written question from Lord Truscott about the impact of tax rises on landlords in the Autumn Budget on the supply of property in the private rented sector and rent levels, Lord Livermore claimed the OBR does not expect reform to property tax income to “significantly affect rents.”
This is despite the OBR’s Economic and Fiscal Outlook report warning that the “successive erosion of private landlord returns will likely reduce the supply of rental property.”
Risks a steady long-term rise in rents
In the Autumn Budget, Chancellor Rachel Reeves announced tax rates on property income would increase by 2 percentage points.
Financial Secretary to the Treasury Lord Livermore claimed the OBR “does not expect that the reform to property income tax will have a significant impact on rental prices.”
However, the OBR’s Economic and Fiscal Outlook report, says the plans in the Budget would reduce returns for landlords.
The document says: “The measures announced in this Budget reduce returns to private landlords, following various measures over the past 10 years that have also reduced returns.
“This successive eroding of private landlord returns will likely reduce the supply of rental property over the longer run. This risks a steady long-term rise in rents if demand outstrips supply.”
Final nail in the coffin for landlords
The Treasury failed to carry out an impact assessment on how the new charge would influence rents or housing availability.
Many industry experts have warned the 2% rise could be the final nail in the coffin for landlords.
Jonathan Stinton, head of mortgage relations at Coventry Building Society, warns: “Hiking property income tax won’t just hit landlords, it will hit renters in the pocket too. When the cost of being a landlord rises, those pressures almost always find their way into monthly rents, meaning those who don’t own a home pay the price. A similar rise to tax on dividends means the cost will also go up for landlords who hold their property in a limited company.
“The more landlords are taxed the less appealing it is to let a property, which could lead to fewer landlords and reduced choice for landlords. The simple but powerful forces of supply and demand would then push rents higher, making it much more difficult to rent a home.”
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Member Since June 2019 - Comments: 781
10:57 AM, 18th December 2025, About 4 months ago
All hinges on the definition of significant. A change of less than £100 pcm may seem insignificant to an MP but could be a huge percentage of the disposable income for a low paid worker.
Member Since May 2025 - Comments: 75
12:03 PM, 18th December 2025, About 4 months ago
I wrote a blog on the tax impact (good news for those with mortgages is that the section 24 relief increases to 22%) when the tax increase comes into effect.
In the example in my blog, if the landlord increases the rent to compensate then the rent increase needs be a percentage more than the what the tax delta is.
So the example in the blog is that if the tax delta is £216 per year then the rent needs to increase by £277 to be neutral.
The multiple is roughly 2.5% increase to the rent but is affected by section 24 relief.
Real loser is the tenant. Rachel wins with more tax regardless.
https://think-we-are-stupid.blogspot.com/2025/12/budget-impact-of-2-additional-tax-on.html
Member Since January 2022 - Comments: 9
12:26 PM, 18th December 2025, About 4 months ago
Yet again the Gov dismisses anything that does not fit its narrative – what a surprise !
All of this is designed to remove the small landlords from the PRS – leaving it to the big corporates – once everything is in their hands the ‘lobbying’ will start to erode any (so called) benefits for tenants and drive the profits upwards.
Member Since February 2016 - Comments: 977 - Articles: 1
12:44 PM, 18th December 2025, About 4 months ago
Why, why we have such an economically uneducated Cancellor and the whole governmemt?
I always thought pasty-face Osborne was the worst in living memory, but Rach from Complaits is even worse than him.
Unbelievable.
Member Since March 2024 - Comments: 281
12:46 PM, 18th December 2025, About 4 months ago
Yet in the October 2024 budget Reeves thought she was the bees’ knees in announcing a one penny cut in duty on a pint of beer (It might have been meaningful in 1974).
Yet 2p in the pound upward pressure on net rent is apparently irrelevant. Anyone asked this Lord the price of a loaf of bread lately? That usually reveals how grounded they are..
Member Since March 2022 - Comments: 365
1:09 PM, 18th December 2025, About 4 months ago
Just like raising employers National Insurance contributions has had absolutely no effect on jobs!
Member Since January 2021 - Comments: 19
1:10 PM, 18th December 2025, About 4 months ago
Yet another example of politicians with no real world or business experience making decisions they do not fully understand. There will be 2 effects, obvious to anyone in business:
1. Supply will drop further as yet more landlords sell up due to unsustainably low returns. This will drive up rents due to the dynamics of supply and demand.
2. The landlords that do remain will seek to recover their losses by raising rents.
Generation Rent will no doubt blame landlords for exploitating tenants. This is despite landlords being no better off. The only winner will be the Exchequer as they increase their tax take. Tenant organisations have done a decent job advocating for tenants in recent years. However, they do need to realise that all their demands heap costs onto the sector, this has an impact and has to be paid for somehow – inevitably with higher rents.
Nothing is for free, and within my own portfolio the “added compliance costs” of legislation in the past 10 year or so (S24, MEES, additional and selective licencing, etc) has directly added about £120 per month to the cost of me supplying my tenants with a good quality home.
Member Since July 2017 - Comments: 462
1:51 PM, 18th December 2025, About 4 months ago
Reply to the comment left by NW Eco specialist at 18/12/2025 – 13:10
Only point I query is you mention increasing the government’s tax take? Fewer landlords even at higher rents will surely, overall, produce less taxable landlord income. At the moment, owner occupiers who will be buying a lot of these landlord property disposals will not be paying any property taxes to the government.
Member Since July 2016 - Comments: 156
3:08 PM, 18th December 2025, About 4 months ago
The government view:
Increased Stamp Duty on BTL purchases. No impact on rents
RRA red tape. No impact on rents
Ombudsman fee. No impact on rents
Portal fee. No impact on rents
MEES reform. No impact on rents
Mass extension of licensing. No impact on rents.
Landlord tax. No impact on rents
Everything taken together? Well, don’t be so bloody stupid. Obviously no impact on rents.
Member Since August 2024 - Comments: 2
6:29 PM, 18th December 2025, About 4 months ago
I was actually very slack about increasing the rent on my one BTL but you can be sure I’ll be increasing it every year, up to the maximum. So the real loser is the tenant.