Budget 2026: New landlord tax raid announced
Landlords will face a 4% surcharge on income tax on rental income from April next year – following the announcement of a new two percentage point increase today.
Basic rate taxpayers will pay 24% tax, and higher and top rate taxpayers seeing their tax rates on property increase to 44% and 49% respectively.
This latest tax raid is a further blow to our sector, which is already reeling from the combined impact of previous tax changes and a tsunami of increased fees and regulation.
It could prove the final nail in the coffin for many investors coming, as it does, on the back of successive tax raids on the PRS in the last decade, including George Osborne’s abolition of mortgage interest relief (MIR) and introduction of the 5% stamp duty surcharge on the purchase of homes.
The Office for Budget responsibility has confirmed the move will mean ‘a material reduction in returns to private landlords’ and has warned the decision is not only likely to force landlords out of the sector, it will also force rents up – something we have warned of for some time.
Budget 'will make life worse for renters'
NRLA chief executive Ben Beadle said: "The Chancellor has today made life harder for renters right across the country.
"As the Office for Budget Responsibility has confirmed, hiking taxes will drive up rents and drive down supply in the rental market when demand is already way ahead of the number of homes available
“How that fits with a commitment to providing households with more breathing space is anyone’s guess.”
He went on to describe the budget as a missed opportunity, adding: “The Chancellor is yet again trying to balance the books on the backs of landlords.
"He should be taking decisions that could boost the supply of homes, reduce rents for tenants and support growth.
"Those investing in property, boosting new development and providing a roof over the heads of renters now face lower returns, less security and more red tape. This will mean one thing: higher rents.”
Steady rent rises predicted
In its response to John Healey’s first budget as chancellor The Office for Budget Responsibility (OBR) said: “These measures collectively risk leading to a steady rise in rents through two effects.
“First, potential landlords are less likely to enter the market, reducing long-run rental supply, which risks a steady long-term rise in rents if demand outstrips supply – which we think is more likely than not.
“Second, landlords are likely to pass on more of these costs to renters in the long-run through a combination of some current landlords leaving, thereby giving more price setting power to remaining landlords, and greater long-run flexibility to raise rents.”
The new rates will apply across England, Wales and Northern Ireland with legislation brought forward in the Finance Bill 2026-27.
In addition to the new tax hike, the chancellor failed to reverse the freeze on Local Housing Allowance - a freeze which is both costing local authorities and undermining efforts to tackle homelessness.
Join our webinar
We are hosting an exclusive member webinar tomorrow to help unpack what today’s announcement means for you and your business.
The event will be held on Zoom between 2pm and 3pm and will include a summary of today’s key announcements and how to prepare.
