Rental tax rise will push up rents – NRLA

Two-thirds of landlords who are planning to raise rents say looming tax changes are the reason for doing so, a survey reveals.

The findings follow the Chancellor’s latest Budget, which set out proposals to lift income tax on rental earnings by two percentage points from 2027.

The Office for Budget Responsibility has already cautioned that the move is likely to feed through into higher tenant costs.

Now research from the National Residential Landlords Association (NRLA) underlines those fears.

Higher taxes bring higher rents

The organisation’s chief executive, Ben Beadle, said: “This research should be a wake-up call to the government.

“Hiking taxes on rented housing will lead to higher rents.

“It’s not exactly clear how this approach will address the cost-of-living crisis ministers now say is the government’s number one priority.”

He added: “More broadly, with no fault repossession due to end in just a matter of months, responsible landlords are seriously concerned about court backlogs.

“Ministers have pledged to ensure the justice system is ready to process cases where landlords have good reason.

“However, as of yet, they have failed to explain what ready means.”

Tax hike hit landlords

The NRLA’s survey found that among those preparing rent rises within the next 12 months, 65% pointed to the tax hike as a central reason.

Only one factor ranked higher, with 68% saying broader property running costs were driving their decision making.

However, landlord concerns extend beyond taxation with the upcoming scrapping of Section 21 ‘no-fault’ evictions.

For 91%, they were either very concerned or slightly concerned about court waiting times.

The NRLA says that official data shows possession cases under the system replacing Section 21 are now taking more than seven months on average to process and enforce.

That represents the slowest turnaround recorded since early 2022.

Tenant demand is high

Landlord sentiment about the PRS remains mixed, though tenant demand is still robust, according to 61% of those questioned.

Yet supply signals point the other way with 24% of landlords saying they had sold homes over the past year.

Just 5% had expanded their portfolios.

The survey also reveals that of landlords who have sold up, 27% of them sold with tenants still living in the property.