Housing minister Matthew Pennycook has insisted that the 4% tax rise on landlord income will only have “a small impact” on rents.

During a Parliamentary debate, finance committee chair Steve Barclay reminded him that the OBR’s economic and fiscal outlook said the consequence of the increase in property income tax would be fewer rental properties and higher rents as landlords passed on those costs. “Does the minister think the OBR is wrong? If not, does he accept that rents will go up as a result of those measures?” asked Barclay.

Pennycook said that at last year’s Budget, the OBR assessed that there would be only a small impact on rental prices of 0.2% as a result of the 2 percentage point increase to property rates from April 2027. “We expect a similarly small impact from this increase,” he said. “The obvious answer to affordability challenges in the private rented sector, as well as everywhere else, is to build more housing supply. Ultimately, the only way we can bring greater affordability is by increasing the supply of new homes.”

Healey

Chancellor John Healey added a further two percentage points to the separate income tax rates on property income - on top of the two points Rachel Reeves announced last November. When both increases come into effect on 6 April 2027, an individual landlord’s rental profits tax will jump to 24%, 44% and 49% for basic, high and higher rate taxpayers, respectively.

Labour’s Paula Barker pointed out that in Liverpool Wavertree, research by Crisis and Zoopla showed just 3% of homes for private rent were affordable for people who claim local housing allowance. “The Office for Budget Responsibility has warned that the increase in tax on property income announced in the Budget could feed through into rents, making an increase in LHA more necessary than ever,” said Barker. “What discussions has the minister had with colleagues in other departments on that issue, as well as on rent regulation linked to inflation and wages, to relieve the pressure on private renters and reduce the cost of increasing LHA?” she asked.

However, Pennycook repeated that the government was against introducing rent controls.

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