Rachel Reeves’s Budget will pile pressure on renters by driving up rents and forcing landlords out of the market, industry leaders have claimed, with one warning: “People can’t take much more.” The stark verdict came after the Chancellor confirmed a 2% increase in income tax on rental profits from April 2027, lifting the basic, higher and additional rates to 22%, 42% and 47%.
Announced in yesterday’s statement in the Commons, the rise ends months of speculation and lands alongside the Renters’ Rights Bill, which will ban no-fault evictions and extend notice periods. Matt Hutchinson, director of flatshare site SpareRoom, said the tax raid could be the final blow for many landlords.
Mr Hutchinson said: “There’s a very real risk landlords facing reduced profit margins will pass this on to tenants by increasing rents, which are already at record highs.
“Tenants have no protections from market volatility and too many people spend 40-50% of their income on rent. People can’t take much more.”
He called it “the straw that breaks the camel’s back” and added: “Driving landlords out the sector in the middle of a supply crisis that’s keeping rents unaffordably high helps no-one, least of all renters.”
Vann Vogstad, founder and CEO of COHO – one of the UK’s largest marketplaces for HMOs and professional rentals – said tenants would bear the true cost.
Mr Vogstad said: “It will be the tenants as well as landlords who pay the price for the Chancellor’s move. This tax hike, especially when coupled with the upcoming Renters’ Rights Bill reforms, will inevitably result in higher rents. That’s just basic economics.”
He warned that landlords unable to raise rents sufficiently would sell, handing the market to corporate giants.
Mr Vogstad continued: “In the cases where tenants can’t afford the rent, landlords will be forced to sell. This won’t help renters onto the property ladder as demand for housing remains strong and prices are unlikely to fall meaningfully. Instead, we’ll see more properties acquired by large corporate landlords who prioritise shareholder value over tenant wellbeing.”
Mr Vogstad said HMOs – often the cheapest per-room option for younger and lower-paid workers – would suffer most because their higher yields of 12-18% (against 3-6% on standard buy-to-lets) mean a far bigger absolute tax hit.
Average private rents in England rose 8.8% in the year to October, according to the Office for National Statistics, with many tenants already spending half their take-home pay on housing.
Industry estimates suggest 100,000–150,000 private landlords have quit since 2016; the new tax is expected to accelerate the exodus.
Mr Vogstad said the Government should be encouraging new shared and purpose-built rental homes rather than “making landlords an easy political target”.
With the changes delayed until the 2027/28 tax year, landlords have 18 months to raise rents or sell – a window that will only tighten supply further.