Budget 2025: Renters braced for price hikes after Rachel Reeves hits landlords with tax increase
Kemi Badenoch warns Rachel Reeves move to increase tax on landlords will lead to rent rises; Tenants are already facing record levels across the UK.
Ms Reeves presented her budget to the House of Commons on Wednesday; The chancellor has announced tax rises of £26 billion, leaving a £22 billion fiscal gap as he sets out plans to close the gap in the public finances.
The tax increases, which come on top of the £40 billion increase announced last year, will be delivered through a freeze on personal tax thresholds and a series of smaller measures. This puts tax revenue at an all-time high of 38 percent of GDP in 2030-31.
The announcements included a two percentage point increase in tax rates on property, savings and dividend income from April 2027; This means homeowners will face higher taxes on their rental income.
The Chancellor told MPs: “Currently a landlord with an income of £25,000 will pay around £1,200 less in tax than his tenant on the same salary because no National Insurance is charged on property, dividends or savings income.
“It is unfair that the tax system treats different types of income so differently, so I will increase the basic and higher tax rate on property, savings and dividend income by two percentage points, and the additional tax rate on property and savings income by two percentage points.
“Even after these reforms, 90% of taxpayers will still pay no tax on their savings.”
Conservative leader Kemi Badenoch took aim at the policy in her response to the Budget, saying: “Increasing tax on landlords will only increase rents. This will push landlords out of the market; it is tenants who will suffer.”
The Office for Budget Responsibility’s fiscal outlook also warned that this policy could lead to increased rents, stating: “The measures announced in this Budget reduce returns for private landlords, following a number of measures that have reduced returns over the last 10 years.
“This successive erosion of returns for private landlords is likely to reduce the supply of rental properties in the long term. This risks a steady long-term increase in rents if demand exceeds supply.”
Rental prices across Britain have already risen to unprecedented levels, with new records set in the third quarter of this year, according to Rightmove. The average advertised rent across England, excluding London, stands at a record £1,385 per month, up 3.1 per cent on the same period last year.
Ben Beadle, chief executive of the National Residential Landlords Association, said the rise in rents would only continue as a result of Ms Reeves’ policy. He said: “Despite claims to tackle cost of living pressures, the Government is pursuing a policy that the Office for Budget Responsibility has made clear will increase rents.
“Almost a million new homes are due to be rented by 2031. But this Budget will saddle tenants with higher costs while doing nothing to improve access to the homes people need.”
Similarly, Mark Hughes of Pure Property Finance said: “Reeves’ introduction of this new approach risks deterring property investment, reducing rental supply and potentially increasing huge costs for tenants.
“Many homeowners are already facing rising interest rates and compliance burdens, and this additional tax pressure could force them to leave the market.”
Tenants simply cannot afford such increases, according to Ben Twomey, chief executive of Generation Rent. Mr Twomey said: “The tax system has been rigged against tenants for too long. It is scandalous that landlords pay less tax than their tenants on their income.”
He added: “Landlords with mortgages, meanwhile, are already charging more than their tenants can handle, so they will struggle to charge them even higher.”
Acorn community association political officer Anny Cullum said landlords should not be allowed to pass the tax increase on to tenants through higher rents. He said: “It is welcome that those with the broadest shoulders pay a fairer share of tax, but it is important that landlords cannot pass the bill on to some of those hardest hit by the cost of living crisis, including private tenants.
“Rents are rising year on year, accounting for an average of 36 per cent of people’s wages. We need to reduce rents, not increase them, and the Government can do this by imposing rent controls.”
“Instead of tax breaks and public money subsidizing private landlords, we should reinvest in the building and maintenance of our social homes, eliminating over-reliance on private rentals and ensuring safe, secure and affordable homes for everyone.”
Zoopla’s rental market report for September 2025 warned that “renting affordability is an increasing challenge for renters and is holding back rent inflation.” The report states: “The average rent in England has risen by just under £80 a week (£4,100 more a year) over the last five years, increasing cost-of-living pressures on renting.
“Many private tenants have below-average household incomes. Almost a third rely on housing benefit to support their rental costs, but funding is not keeping pace with rent increases.
“This means affordability is a growing constraint on renters, affecting the pace of rent inflation, which slowed sharply across much of the country last year.”
