Tax warning: New hikes will push up rents
Two thirds of landlords planning to increase rents say upcoming tax hikes are a key factor, according to new polling.
In November’s budget Chancellor Rachel Reeves announced plans to increase income tax on rental income by two percentage points from 2027.
In response, the Office for Budget Responsibility (OBR) warned that it would lead to higher rents.
The new research, by consultancy Pegasus Insight backs up its claims, with a poll of NRLA members showing that, among landlords who are set to increase their rents over the next year, 65% cite the tax rise as a key factor in their decision.
This was second only to the 68% who said it was to cover the increased cost of running a property more generally.
Courts warning
The research, based on more than 800 interviews over the last two months also flagged fears over court backlogs to be landlords’ leading worry, ahead of the introduction of the Renters’ Rights Act, with 91% saying they were concerned about court wait times.
The findings come as Government data shows it takes an average of over seven months for the courts to process and enforce possession cases brought to it under section 8 – the system replacing section 21 – the longest it has been since the start of 2022.
When it comes to market conditions more broadly, 61% said tenant demand was now strong. In spite of this, almost a quarter (24%) said they had sold property over the previous 12 months, compared with just 5% who said they had purchased properties during the same period.
At 19 percentage points, the gap between those saying they have sold property, and those saying they have purchased any is over twice the level it was at the start of 2024.
Of those who have sold property in the last year, over a quarter (27%) did so with existing tenants in situ.
Wake up call
Ben Beadle, chief executive of the NRLA, 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.
“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.
“Warm words mean nothing without a clear plan to ensure legitimate possession cases are processed and, if needed, enforced far quicker than at present.”
