Government insists property tax rise will have little impact on rents

The government claims a two-percentage-point tax rise on property income would have only a small impact on rents.

Chancellor John Healey announced in the Budget that tax rates on property and savings income will increase by a further two percentage points from April 2027, adding to the rise announced by Rachel Reeves last year.

During a debate, Housing Minister Matthew Pennycook claimed the additional increase would have only a small impact on rent prices.

Push rents up higher

Mr Pennycook told the debate: “At the Budget last year, the Office for Budget Responsibility (OBR) assessed that there would be only a small impact on rental prices of 0.2% as a result of the 2 percentage point increase to property rates from April 2027, and we expect the further increase of 2 percentage points announced in the Budget last week to have a comparably small effect.”

However, during the debate, Conservative MP Steve Barclay pointed to the OBR’s assessment of the additional two-percentage-point tax rise, warning that the measure could push rents higher for tenants and reduce the supply of rental properties.

Mr Barclay asked Mr Pennycook: “Does the Minister think the OBR is wrong? If not, does he accept that rents will go up as a result of those measures?”

Small impact on rents

Mr Pennycook continued to claim the additional two-percentage-point increase would have only a small impact on rents, while criticising the Conservatives over their opposition to new housing developments.

He said: “At the Budget last year, the OBR assessed that there would be a small impact of 0.2% on rental prices as a result of that increase, and we expect a similarly small impact from this increase.

“The obvious answer to affordability challenges in the private rented sector, as well as everywhere else, is to build more housing supply.

“That is why it is so disappointing that Opposition Members, despite what those on their front bench say, consistently complain about new housing developments coming forward in their constituencies.”