Another financial squeeze on landlords in the upcoming Budget could prompt rent increases, property sales and cause some landlords to leave the private rented sector altogether.

New research from LegalforLandlords found that 59% of UK private landlords are pessimistic about the Budget, with concerns over taxation and the sector's future profitability weighing heavily on confidence - just 28% believe letting property will remain financially worthwhile over the next five years.

Of those polled, another 22% are most worried about increases to capital gains tax, while 20% identify income tax on rental income as their primary concern. A further 18% are concerned about the cost of any obligatory energy efficiency upgrades that could be introduced.

Selling

If the Chancellor increases the tax burden on landlords, 40% will increase rents where possible, a further 18% would consider selling properties, and 16% would leave the PRS.

With John Healey looking for additional cash to fund government policies, many property experts are forecasting a range of additional taxes on property to increase income for the treasury, with changes to capital gains tax (CGT) among the options being examined.

David Alexander, CEO of letting agency DJ Alexander, (pictured) says changing CGT to target landlords and second homeowners sounds like a relatively simple proposal but that more investment not less is needed in the PRS and that this would clearly be a disincentive. “The anticipated revenues will not be achieved but a resultant reduction in the size of the PRS would cause a significant rise in demand and consequent uplift in rental costs,” he says. “Tenants would ultimately pay the price for this policy.”

Portfolios

Nick Statman, CEO of property solutions company Bettermove, agrees that landlords are already reassessing their portfolios because of higher costs and regulation. Increasing CGT could discourage some from selling, while others may decide to exit the sector altogether, he adds.

“I’d therefore like to see the Chancellor support the entire property sector, from first-time buyers and existing homeowners to landlords, estate agents and housebuilders by, in particular, getting inflation under control, create the conditions for mortgage rates to fall and make it commercially viable to build more homes,” says Statman.

"If the Budget encourages people to buy, sell, invest and build, that would be a positive outcome. My concern is that further taxation and uncertainty could have the opposite effect.”

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