Government dismisses claims property tax rise will push up rents despite OBR warning
4 months ago | 23 comments
MPs clash over property income tax amid warnings it will hurt landlords and tenants
9:28 AM, 15th January 2026, 3 months ago
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A Conservative MP claims Labour’s decision to raise tax rates on property income will hurt renters and reduce rental supply.
The Autumn Budget increased tax rates on dividends, property, and savings income by 2 percentage points.
In a Parliamentary debate on the 2026-2027 income tax charge, the Conservatives argued that many landlords are ordinary people who will struggle to afford the higher taxes.
The Finance Bill 2026, which implements these Budget measures into law, included a proposed Conservative clause requiring the government to publish an assessment within six months of the impact of the new property income tax.
This clause was not agreed to, but could potentially be reinstated later in the parliamentary process.
Landlords are not people gaming the system
Speaking during the debate, Shadow Financial Secretary Gareth Davies, pointed out the government’s stereotype of landlords is far different than the reality.
He told MPs: “Government members may take great satisfaction in what could be described as a war on landlords, but we should pause and remind ourselves who many landlords are.
“They are not barons or vast landowners; they are ordinary people doing what we have encouraged them to do for decades: taking responsibility for their future. They are the couple, one parent works long hours in a steady job, and the other juggles work and family life, who save carefully and invest in a small property because they know that the state pension alone might not be enough when they retire.
“They are the retired couple who inherit a modest flat from their parents, a flat that is not a windfall, but a source of security in later life, and who rent it out to supplement a fixed income.
“These are not people gaming the system, as many Labour Members have tried to suggest in the past, but people responding to it. They are good people. Forty-four of them are Labour MPs.”
Mr Davies warns the measures will hurt landlords and tenants as he called for the government to publish an assessment of the impact of imposing new rates of income tax on property income.
He said: “This new tax does not just hit landlords, though, it hits renters, too. The British Property Federation and the Office for Budgetary Responsibility have both warned that this measure could restrict the supply of private rental properties, adding pressure to an already strained market.
“The Royal Institution of Chartered Surveyors and the National Residential Landlords Association (NRLA) both say that rents will rise faster as a direct result. New clause 12 in my name seeks to force the government not to rely on their stereotypes about landlords, but to assess the impact of their new renters’ tax on both the supply and cost of private rental properties.”
Not fair that renters pays a higher rate of tax on their income than landlords
The Exchequer Secretary, Dan Tomlinson, claimed the landlord tax rise is fair and reasonable and rejected the Conservatives’ clause calling for an impact assessment.
He said: “Those with property, savings or dividend income currently pay lower rates of tax than those whose income comes from employment as they do not pay national insurance contributions.
“It is not fair that the tax system treats these types of income so differently. For example, it is not fair that a renter pays a higher rate of tax on their income than the landlord from whom they are renting their property.”
He adds: “The shadow Financial Secretary raised the change landlord income tax, the two percentage point increase. I fully understand, as does he, that there are many reasons why people end up becoming landlords.
“We want to make sure that the taxation is fair and reasonable, which is why landlords do not pay national insurance in the way that their tenants do, and it is why we have taken steps to reduce, but not close in full, the gap in tax treatment, with the two percentage point increase. Landlords will still typically pay a lower rate of tax than their tenants, but the gap will be reduced following the measures set out in the Budget.”
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Member Since February 2025 - Comments: 18
3:10 PM, 15th January 2026, About 3 months ago
A friend of mine is leaving a bad marriage, the house is sold and the husband moved out several months ago. Now my friend has to rent while the divorce gets sorted out but she can’t find anywhere available in the large market town she lives in.
Suspecting the government would make a pig’s ear of the RRA, I’ve sold 5 properties in that town since the election….2 more to go and I’m done.
It’s immensly reassuring to hear from Matthew Pennycook that landlords are not leaving the market and there’s no shortage of rental property. I must tell my friend she’s wrong and there isnt a problem, despite what she’s experiencing.
Member Since May 2015 - Comments: 2204 - Articles: 2
3:22 PM, 15th January 2026, About 3 months ago
Reply to the comment left by John Taylor at 15/01/2026 – 15:10
Pennycook says there is no evidence that landlords are leaving the market and as politicians never lie, your friend must be wrong.
Member Since May 2018 - Comments: 2037
4:08 PM, 15th January 2026, About 3 months ago
Reply to the comment left by Paul at 15/01/2026 – 10:06
In fact these comments have been made many times on this forum by many people, including by me. It was George Osborne who introduced the policy stopping landlords who held properties outside a Ltd co. from offsetting their finance costs against rents (I believe in an attempt to help the children of middle-income families get their first step on the property ladder) but this policy didn’t really bite until interest rates went up. For many landlords the only option then was to raise rents in order to recover the additional tax. And as you correctly point out, adding an extra 2% tax without allowing finance costs to be offset adds to that pressure.
Either landlords have to raise rents….or they have to exit and this is likely to contribute towards any imbalance of supply and demand in the property rental market. I have seen a few recent reports that an increasing number of former rental properties have been snapped up by first-time-buyers so maybe George Osborne’s policy has started to work. But this won’t help tenants and it won’t help increase supply of rental properties.
But labour has been told all this, many times. The current policy to force landlords and self-employed people earning more than £20K gross to submit returns via Making Tax Digital only adds to the pressure.
This government PRETENDS to grow the economy, and does something different. This government PRETENDS to act for tenants, and does something different. This government PRETENDS that it will build 1.5 million new homes, but it won’t because it is attacking investors from investing. How much of all of this is incompetence and how much is dishonesty is very hard to say. But it’s certainly not competent.
As other people have already said, this policy will hurt tenants more than it hurts landlords.
Member Since March 2018 - Comments: 184
5:30 PM, 15th January 2026, About 3 months ago
Reply to the comment left by Paul at 15/01/2026 – 10:06
Can you please clarify and give an example of what you mean by “all income should be taxed relative to the turnover of the sourcing organisation, apportioned by employee count or salary percentage”. Many thanks.
Member Since March 2018 - Comments: 184
5:43 PM, 15th January 2026, About 3 months ago
Google says that only 2% of PRS properties are owned by Build To Rent developers, whereas Agencies say 25% of properties for sale on Zoopla, etc are PRS Landlords selling up. If these figures are right, is the Housing Minister naïve to think BTR developers will quickly take the place of PRS Landlords, and that tenants will not suffer from these policies?
Member Since December 2024 - Comments: 63
9:35 PM, 15th January 2026, About 3 months ago
Reply to the comment left by Jo Westlake at 15/01/2026 – 10:19
Welfarism defeats all risk taking, personal responsibility and self reliance. That is why we are in a doom loop of ever decreasing circles.
The trouble is, the British public vote for politicians who hand out instead of take away.
And that is the nub of the problem.
Member Since January 2026 - Comments: 2
10:55 AM, 17th January 2026, About 3 months ago
I sold my one and only btl flat 2 years ago. Between the tapering off of mortgage interest relief and the ever spiralling service charges coupled with a number of bad tenants over the years and it simply became a burden.
Now I invest in the markets. While it is risky I am no longer saddled with an unprofitable illiquid asset. And with the introduction of policies from this useless vindictive administration I have to say I feel relieved to be out.
Best of luck to all still in the game
Member Since October 2020 - Comments: 63
9:23 AM, 20th January 2026, About 3 months ago
Reply to the comment left by The_Maluka at 15/01/2026 – 10:18
Yes there is something the NRLA could be doing.