Seven in ten landlords are considering increasing rents following the Government's latest property income tax changes, while almost half are weighing up reducing their portfolios, raising concerns about the future supply of privately rented homes.
Research commissioned by Legal for Landlords and based on a survey of 650 UK landlords found that 70% are considering rent increases following the decision to raise property income tax rates for individual landlords by four percentage points from April 2027.
Almost a third (32%) said they would increase rents specifically to offset the additional tax, while a further 38% are considering doing so. Just over one in five (22%) said they would absorb the extra cost themselves, while 8% did not believe their local rental market could support further increases.
The findings also point to potential changes in landlords' investment plans. Almost half (47%) said they were considering reducing their property investments. This included 23% who were considering selling one or more rental properties and 17% who were considering selling their entire portfolio and leaving the market.
More broadly, 61% said they were either actively planning their exit from the private rented sector or seriously considering doing so.
Tax changes threaten future landlord investment
The survey suggests the tax increase could also affect future investment in the sector. Almost half of respondents (45%) said they had decided against buying any more properties as a result of the changes.
Just 2% still intend to expand their portfolios, while 35% said they had not planned to purchase additional properties in any case.
Landlords also expect the changes to affect their profitability. More than a third (37%) anticipate a substantial reduction in profits, while a further 37% expect a noticeable decline. Just 6% said they did not expect the tax changes to affect their profitability.
Dissatisfaction with the changes is widespread. Overall, 88% of landlords said they were unhappy with the additional tax, while 83% believe the latest measures will make the private rented sector worse for both landlords and tenants.
"The concern is that tenants could face pressure from two directions." said Sim Sekhon, Group CEO of Legal for Landlords. "In the immediate term, landlords are telling us that additional taxation and rising operating costs could lead to higher rents. But there is also a longer-term question about what happens if landlords increasingly decide that investing in the private rented sector is no longer financially viable.
"If landlords sell their properties and fewer investors enter the market, there is a risk that the supply of privately rented homes will come under further pressure. That could make it harder for tenants to find suitable accommodation.
"However, we would encourage landlords who are feeling the pressure not to make any hasty decisions about selling up or leaving the sector. While the financial and regulatory landscape is undoubtedly becoming more challenging, it is important to understand all the options available before deciding that being a landlord is no longer viable.
"Taking professional advice on finances, tax arrangements and the management of their portfolios could help landlords identify ways to adapt and protect the long-term sustainability of their investments.
"A sustainable rental market needs landlords who are confident enough to invest and maintain their properties, as well as tenants who can afford to rent them. We need to consider the wider consequences of policies that risk undermining that balance, while ensuring landlords have the support and advice they need to navigate an increasingly complex market."
