NRLA calls for tax reforms as landlords face rising costs

A landlord association has urged the Chancellor to support landlords for the upcoming Autumn Budget.

The National Residential Landlords Association (NRLA) has written a budget submission to the government calling for a tax system that supports the private rented sector.

The association is also urging the government to unfreeze Local Housing Allowance (LHA) rates.

Proposed reforms to CGT

There have previously been calls from tenant groups to bring Capital Gains Tax (CGT) rates into line with Income Tax rates.

The CGT rates for residential property in England are currently 18% for gains falling within an individual’s basic-rate band and 24% for gains taxed at the higher or additional rate.

Landlords pay Income Tax on their rental profits at rates of 20%, 40% and 45%. From 6 April 2027, separate rates for property income will increase by two percentage.

The NRLA opposes proposals to bring CGT rates on residential property into line with Income Tax rates. Instead, it has proposed reforms to make CGT more closely reflect genuine economic gains.

In its budget submission, the NRLA proposes two linked reforms: “Index the allowable base cost of residential property for inflation using CPI. The base cost should include the original purchase price, Stamp Duty and other acquisition costs, together with qualifying capital improvements, with each indexed from the date on which the expenditure was incurred.

“Grade the maximum relief available according to the length of ownership. A property disposed of within three years would receive no relief, with the maximum amount available increasing progressively according to the period for which the property had been held.”

The NRLA adds that safeguards must apply and said: “The relief must never create or increase an allowable capital loss. Secondly, it must never exceed the inflation actually experienced. The purpose of the reform is to prevent inflation being taxed as a genuine gain, not to shelter real increases in value from CGT.

“The reform would address both fairness and economic efficiency. It would ensure that CGT focuses more closely on genuine economic gains, while reducing the incentive for owners to retain properties simply to avoid crystallising a substantial tax charge.

“In turn, this would allow capital to move more freely to where it can be put to better use, including investment in new rental properties and improvements to existing stock. This will become increasingly important as landlords need to invest in meeting new minimum energy efficiency requirements and the Decent Homes Standard.”

Unfreeze LHA rates

During the Autumn Budget 2025, ministers announced that LHA rates will remain frozen for a second consecutive year in 2026/27.

The NRLA has called for the government to unfreeze LHA rates and re-link them to at least the lowest 30% of rents.

The NRLA says: “Continuing to freeze LHA rates undermines some of the core objectives of the Renters’ Rights Act, which seeks to improve access to the sector for, among others, those in receipt of benefits.

“We recognise concerns in government that increasing LHA rates inflates market rents, placing too much pressure on public finances. However, the evidence does not appear to support this. Our analysis shows that, between the introduction of the LHA rate in April 2008 and the freezing of the rate in March 2016, average weekly rents across England increased by an average of 2.7% a year.

“In contrast, between April 2016 and March 2025, when LHA rates were frozen (with the exception of 2020/21 and 2024/25), average weekly rents increased by an average of 3.4% a year. Rents therefore rose faster while LHA rates were frozen than while they were being uprated.”

Greater investment in the workforce

The association is also calling for greater investment in the workforce needed to retrofit the UK’s housing stock.

The government has proposed that all privately rented properties will need to meet an EPC C standard by 2030. The NRLA argues that urgent reform to the tax treatment of energy-efficiency investments is needed if the government’s plans are to be successful.

The NRLA says: “We are calling on the government to classify specific investments in energy-efficiency measures as revenue expenses, and therefore deductible against profits in the year they are incurred for Income Tax purposes.”