Tax rises and rent: a more nuanced reality
- Admin
- Dec 5, 2025
- 3 min read
Chancellor Rachel Reeves has announced in the Autumn Budget that property income tax will increase by 2% from 2027. Media coverage has been quick to suggest that this – alongside other tax increases – will inevitably be passed on to tenants through higher rents or will prompt landlords to exit the market.
These claims are not without some basis: our research shows that cumulative tax changes do influence landlord decisions around portfolio acquisitions, sales, and rent-setting. According to our Voice of the Landlord survey, 19% of landlords increased rent due to “recent tax changes”. Over 40% of landlords who sold properties within the last year cited “changes to tax regimes” as one of their reasons.
Yet, as is often the case in industry discussions, the reality is more complex. Several important caveats must be considered:
Rental ceilings exist in many areas. Some local markets have already reached the maximum that tenants can realistically pay, meaning landlords cannot simply “pass on” costs indefinitely. According to Savills research, an “affordability ceiling” will limit rental growth from 2025.
Large professional or institutional landlords may actually benefit. If smaller landlords do exit, larger players may consolidate, changing the structure of the market rather than shrinking it overall. Recent data supports this: ‘one property’ landlords halved between 2010 and 2024 while those with 2 to 4 properties rose from 20% to 30%, and 5 or more properties from 40% to 50%.
Landlords have alternative responses other than raising rents or exiting. This includes reducing maintenance/upgrade spend, refinancing or restructuring debt, or absorbing some costs in the short-term.
Landlords vary widely in motivation. Our research shows that nearly half (47%) of landlords began letting property to supplement their income. Yet when asked how they view their investment, just over half (51%) see their properties as a long-term contribution to their pension and 41% as an investment for capital growth. Some of these landlords may operate at near-zero profit margin with a focus on achieving capital appreciation in the long run.
An exit doesn’t always reduce rental stock. A landlord selling doesn’t necessarily mean a property leaves the rental pool. For example, our research show that nearly a third of properties sold in 2025 returned to the private rented sector. Additionally, and perhaps encouragingly in view of the affordable housing supply crisis, more than 10% were acquired by councils or housing associations and let to social housing tenants at below-market rates. A further 8% moved to the short-term rental market.
Geography matters. Changes may play out slightly differently in various parts of the market. For example, significantly more landlords in the Greater London area (28%) raised their rent as a response to tax changes than in Yorkshire and the North-East (10%).
Behaviour isn’t instant. Landlords are unlikely to make overnight reactions to single policy shifts. We know from research it’s the cumulative impact of regulation that is important. We do know that past tax changes have had a significant impact on the sector, so these combined with the latest changes may have an impact.
Landlords’ decisions are not purely economic. Our own data shows that a significant proportion of landlords (over 40%) chose not to increase rent due to non-financial considerations. For example, concern about their tenants’ cost-of-living pressures or a desire to retain a good tenant and maintain stability. This highlights that landlord behaviour isn’t solely responsive to market or tax signals, but also shaped by personal relationships, ethical considerations, and long-term tenancy priorities.
Ultimately, landlord responses to the Budget are unlikely to be immediate or uniform – and understanding them requires moving beyond headlines to the more complex realities revealed by evidence.
