A Pincer Movement on Rents
Yesterday’s Budget will put upward pressure on rents in two ways.
First, it will accelerate the exodus of landlords from the market and deter others from entering. Fewer landlords providing homes means a smaller supply of rental property. Unless demand falls alongside it, which it will not, it puts further pressure on rents.
Second, the combined increase in property income tax rates is now 4%, double the rise previously announced. That is another squeeze on landlords’ returns, and many will look to recover the additional cost through higher rents.
To use a military analogy, this is a pincer movement on rents: shrinking supply on the left flank and rising costs on the right. Both push in the same direction, with tenants squeezed in the middle.
The Government cannot keep making the provision of rental properties less attractive and expect more homes and cheaper rents.
My view is that this measure will achieve precisely the opposite.
Dominic Farrell
Sources and tax context
The combined rise described above is four percentage points in property income tax rates, due from April 2027. It concerns landlords taxed on property income personally; it is not a four percentage point rise in corporation tax.
About Dominic Farrell
Dominic Farrell is a property investor, author and former British Army Major who has been investing in property since 1999. Explore his hands on property mentorship and approach to assessing opportunities and investment risks.
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