Landlords warn Budget tax rise will force them to raise rents
Landlords say a 2 percentage point rise in income tax on rental income announced in the Budget will push them to increase rents or sell properties. They argue that the change, on top of recent taxes and regulation, will make buy-to-let less viable and could reduce rental housing.
From April next year, the article says basic rate taxpayers will pay 24 per cent on rental income, higher rate taxpayers 44 per cent and additional rate taxpayers 49 per cent. For a landlord with £12,000 annual rental income after expenses, the stated tax bill rises from £2,400 to £2,880 at the basic rate, and from £4,800 to £5,280 at the higher rate. One Manchester landlord with 40 flats says he plans to raise rents; an East Midlands and East of England landlord plans to sell at least half his properties over the coming years.
In short
- Landlords warn higher tax could raise rents.
- Tax rates on rent rise by two percentage points.
- Some landlords say they plan to sell properties.
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The case for
Landlords can argue that higher tax reduces the return on rental property, especially alongside other costs and regulations, so raising rents or selling may be a practical response. If enough landlords leave the market, the supply of rental homes could shrink, making it harder for tenants to find housing.
The case against
Tenants and housing advocates can argue that landlords’ tax bills are a cost of owning an investment, not an automatic reason to charge tenants more; rent levels also depend on what renters can afford and on local supply and demand. They may add that selling does not necessarily remove homes from the housing stock, since new owners could continue renting them or make them available to owner-occupiers.
Explained simply
Buy-to-let is when a person buys a home to rent out. Rent is income, so landlords pay tax on it; the amount depends on their income tax band. The Budget change described here is due to start next April.
Landlords say the tax rise comes alongside other costs and rules affecting rented homes. They may respond by charging tenants more, selling properties or leaving the rental market. What happens matters to renters and to the supply of homes available to rent.