Labour’s tax raid on landlords: A recipe for higher rents and housing chaos

All private landlords know the PRS is under siege, and Labour’s latest madcap tax proposals are pouring fuel on an already smouldering housing crisis.

Chancellor Rachel Reeves, backed by Prime Minister Keir Starmer, is reportedly gearing up for a tax raid on landlords, targeting rental income and capital gains to plug a growing budget deficit.

But this isn’t just an attack on landlords – it’s a policy that will ricochet, hitting tenants hardest with higher rents and fewer homes to choose from.

This is yet another example of politicians failing to join the dots before implementing a proposal, a consistent misunderstanding of unintended consequences.

Talk of new taxes and regulations appears to me that the government is oblivious to the chaos it’s about to unleash.

CGT hike worries

The National Residential Landlords Association (NRLA) has also sounded the alarm, with a survey revealing that 83% of landlords are deeply worried about a potential hike in Capital Gains Tax (CGT) when selling rental properties.

Yet, it appears that Labour MPs are pushing for additional levies, such as National Insurance (NI) on rental profits or even VAT on residential lettings.

These measures, they argue, will mean that landlord contributions will align with those of self-employed workers.

But the reality is far messier – and far more dangerous.

Since 2015, landlords have been battered by punitive tax changes, including the removal of mortgage interest relief and a stamp duty surcharge on additional properties.

These policies have already driven many out of the market, shrinking the PRS by an estimated 50% since 2016.

Tax on landlords

Adding more taxes, such as a proposed 6% NI on rental profits between £12,570 and £50,270, or a 20% VAT on lettings, will only accelerate this trend.

Landlords won’t absorb these costs; they’ll pass them on to tenants or exit the market entirely.

It has always been the case that any tax hike or a cost for a landlord means higher rents.

We are seeing in real time that landlords are being hammered for ideological, not practical, reasons.

These sentiments aren’t just anecdotal, they are – sadly – backed up by data.

Rightmove reports that 18% of homes for sale are former rentals, up from 8% in 2010, as landlords sell up to avoid financial ruin.

Landlords don’t ‘work’

The government’s rhetoric doesn’t help. Two-tier Starmer’s claim that landlords aren’t ‘working people’ dismisses the reality of managing properties – a job that involves maintenance, tenant disputes and navigating a maze of regulations.

He must know all of this since he is apparently renting out his own former family home.

This ideological framing paints landlords as greedy profiteers, ignoring the fact that many are small-scale investors, most are over 55 so don’t need the extra hassle, relying on rental income for retirement.

A CGT hike, potentially raising rates from 24% to 40% or more, could wipe out our nest eggs.

It’s no surprise that X/Twitter users and property experts are saying that landlords with London properties should sell now before CGT rates soar, noting that sales can take six months.

However, I also find Labour’s other proposals equally alarming.

Introducing VAT on residential lettings would be a disaster, as Robert Salter of Blick Rothenberg warned, telling the Telegraph: “It would clearly result in significant rental property inflation.”

No-one will invest

Another option, a dedicated rental income tax band, would curb tax-minimising strategies but add complexity, further deterring investment.

If rents are subject to VAT, would we put the rent up 20% and cause alarm or would we have to lower the rent, so the VAT-inclusive figure matches the previous rent figure?

If so, I’m guessing that Rachel from Accounts must realise there would be no takers for that.

The government’s approach seems driven by a belief that punishing landlords will free up homes for first-time buyers. Spoiler alert: it won’t.

Labour’s mental tax policies also risk weaponising debt and regulation.

Landlords face rising costs from new energy efficiency rules, with an estimated £24 billion needed to meet EPC rating ‘C’ by 2030.

Punitive council fines

Add in arbitrary fines for tenants’ recycling habits or huge council penalties for ‘non-compliance’, and it’s clear the government is squeezing landlords until they break.

One X/Twitter user described this as a ‘sustained, multi-pronged offensive’, warning that the sector could be ‘dismantled and handed over to state-friendly operators’.

That point isn’t so absurd when you look at Labour’s front bench who don’t have any real-world experience of running a business or employing people.

Everything they know they read in a book or heard at a rally.

I don’t think they understand irony either.

Labour’s proposed tax raid won’t just hurt landlords because it will deepen the housing crisis they claim to want to solve.

But tenants – many of them voting for Labour – will be left to fend for themselves in a market dominated by faceless corporations.

If Reeves and Starmer want to fix their multi-billion deficit, they should look elsewhere.

If this really does to come to pass – and we are skint as a country – then let your tenants know why their rent is going up again.

Then tell them to thank their government of clowns and idiots who thought that hitting the housing providers financially would make rents cheaper but did the exact opposite.

Until next time,

The Landlord Crusader