Research from Pegasus Insight, the Intermediary Mortgage Lenders Association (IMLA) and Propertymark has highlighted the forecast impact of tax changes for landlords and tenants.
Higher rents amid affordability concerns
A post-Budget poll of 168 National Residential Landlords Association (NRLA) members by Pegasus Insight found that 73% expected the changes to rental income tax to lead to higher rents.
The most common response, representing 38% of all respondents, said they would impose an increase of 5-10% or market rents, whichever is highest.
Meanwhile, Propertymark’s latest rental market figures point to continuing affordability challenges for tenants.
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Average monthly rents increased in eight of the 11 UK regions between September and October, with Wales recording the largest rise at 31.1%, followed by the North East at 29.8% and the South West at 7.5%. Scotland, London and the North West were the only regions to record monthly falls.
On an annual basis, the salary required to secure an averagely priced rental property increased in eight regions. Scotland recorded the largest rise at 3.2%, followed by Wales at 3% and the South West at 2.5%.
There were improvements in the North East, where the representative salary requirement fell by 6.1%, the East Midlands, which recorded a 2.8% decrease, and the North West, where it fell by 1.1%.
Mark Long, director of Pegasus Insight, said there were repeated warnings against hiking taxes on landlords.
He said: “Announcing another two-percentage-point rise before the previous increase has even taken effect suggests those warnings have gone unheard.
“The government needs to consider what it is asking landlords to deliver and whether its tax policy supports that. Tenants need good-quality homes at rents they can afford, and providing those homes requires continued investment. Squeezing the income available to fund that investment risks undermining those ambitions.”
Kim Lidbury, president of ARLA Propertymark, said improving affordability for tenants would ultimately mean increasing the supply of good-quality rental homes.
“Supporting responsible landlords to remain in the sector and invest in their properties, while addressing the wider shortage of housing, will be essential to creating a more balanced and sustainable private rented sector for tenants,” Lidbury added.
Mortgaged landlords particularly burdened
The IMLA’s report, The October 2026 Budget: Impact on the housing and mortgage markets, warned that changes could prompt individual landlords to reconsider how they balanced income, potential capital growth and the costs associated with changing their investments.
It highlighted that the tax burden would be particularly significant for mortgaged landlords because mortgage interest is no longer fully deductible when calculating taxable income and has instead been replaced by a basic-rate tax credit.
However, the IMLA reiterated that reduced rental income does not automatically mean landlords will sell their holdings, as other economic factors had to be considered, including investment timescales and current borrowing levels.
Pegasus found that 52% of landlords said they planned to sell property over the next 12 months in response to the tax changes. Only 2% planned to buy more rental property. However, 26% expected no changes and one-fifth of landlords said it was too early to decide.
Kate Davies, executive director of the IMLA, commented: “Landlords will respond differently to these changes, depending on their financial circumstances and what they want from their investment.
“Some will continue to see a strong case for holding property over the long term, particularly where they anticipate capital growth. Others may decide that lower rental income, alongside their wider costs and commitments, changes that calculation.”
