A poll of 50 brokers by Landbay found that Chancellor Rachel Reeves’ potential plan to apply National Insurance tax to rental income could mean the majority of landlords would trim down their portfolios.
Over 25% of brokers polled said the move could lead their landlord clients to sell some of their properties – cutting down their portfolios but ultimately remaining in the private rented sector (PRS).
However, almost half – 45% – said they thought their landlord clients would sell off their entire portfolios and subsequently leave the PRS.
According to these estimates, almost three-quarters of landlords could sell off properties if the tax changes are announced in the upcoming Autumn Budget, meaning rent prices for remaining properties would likely surge.
Some 23% of brokers said they thought the change would make no difference, and just 5% predicted that their landlord clients might expand their portfolios.
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The mooted National Insurance change is one of a number of moves the Chancellor is reportedly considering, including replacing stamp duty with a property tax and the introduction of a ‘mansion tax’.
Landlords selling up ‘could exacerbate the housing crisis for renters’
Rob Stanton, sales and distribution director at Landbay, said: “Rachel Reeves is looking for tax-raising measures that will enable Labour to claim it has not broken its election promise to increase VAT, income tax or NI. But she may not raise as much as she expects. The amount of tax she expects to raise is based on Office for National Statistics figures, which show that, during the most recent tax year data published (2022/23), some 2.2 million landlords received £27bn in rental income. I am worried this might backfire, though. First, she’s not going to raise that much if a million landlords sell up, however resilient the sector is in the face of market interference.
“Second, this could drive up rents – as demand for rental property outstrips diminishing supply and remaining landlords look to recoup the cost by raising rents. That could exacerbate the housing crisis for renters.”
He added: “If there’s a positive here, given that smaller landlords are the ones most likely to leave the market, this could lead to increasing professionalisation of the private rented sector – and drive moves to limited company structures as landlords look to adapt to the change.”
