Chancellor Rachel Reeves has unveiled a significant tax increase on landlords in her Budget 2025 announcement, prompting immediate warnings that tenants will bear the brunt through higher rental costs across Britain.
The Budget Announcement and Tax Changes
During her Commons address on Wednesday 26 November 2025, the Chancellor revealed plans to increase tax rates on property, savings and dividend income by two percentage points from April 2027. This forms part of broader tax rises totalling £26 billion, alongside £22 billion in fiscal headroom.
Ms Reeves justified the move by highlighting what she called an unfair disparity in the tax system. "Currently, a landlord with an income of £25,000 will pay nearly £1,200 less in tax than their tenant with the same salary because no National Insurance is charged on property, dividend or savings income," she told MPs.
The Chancellor emphasised that even after these reforms, 90% of taxpayers will pay no tax on their savings. The overall tax take is projected to reach an unprecedented 38% of GDP by 2030-31.
Immediate Backlash and Warnings
Conservative leader Kemi Badenoch delivered a swift response, criticising the policy's potential impact on the rental market. "Hiking tax on landlords will only push up rents. It will push landlords out of the market – the people who will suffer are the tenants," she warned.
The Office for Budget Responsibility reinforced these concerns in its fiscal outlook, stating that successive reductions in landlord returns will likely reduce rental supply over the longer term. The report cautioned that this "risks a steady long-term rise in rents if demand outstrips supply."
Current Rental Market Pressures
Britain's rental market is already experiencing unprecedented strain. According to Rightmove data from the third quarter of 2025, average advertised rents outside London have reached a record £1,385 per month, representing a 3.1% annual increase.
Industry experts expressed alarm about the Budget's timing. Ben Beadle, chief executive of the National Residential Landlords Association, stated: "Despite claims of tackling cost-of-living pressures, the Government is pursuing a policy that the Office for Budget Responsibility has made clear will drive up rents."
Mark Hughes from Pure Property Finance added that many landlords are already facing rising interest rates and compliance burdens, suggesting this additional tax pressure could force them to exit the market entirely.
Renter Perspectives and Calls for Protection
Ben Twomey, chief executive of Generation Rent, offered a different perspective: "For too long the tax system has been rigged against renters. It's scandalous that landlords pay less tax on their incomes than their tenants."
However, he noted that landlords with mortgages are already charging as much as their tenants can bear, potentially limiting their ability to pass on further costs.
Anny Cullum, political officer for community union Acorn, called for stronger tenant protections. "Those with the broadest shoulders paying a fairer share of tax is welcome, but it's important that landlords aren't able to pass the bill to some of those squeezed the most by the cost-of-living crisis," she argued.
The debate continues as Britain faces an estimated need for almost one million new rental homes by 2031, with the Budget measures likely to shape the housing market for years to come.
