John Healey Landlord Tax Crackdown: Millions Face Higher Bills as Experts Warn of Rising Rents

Published: 30 October 2026

Chancellor John Healey has announced a fresh tax crackdown on UK landlords, confirming that income tax on rental profits will rise by a further two percentage points from April 2027, triggering warnings that tenants could face higher rents while more property investors consider selling their homes.

The announcement, delivered in the Autumn Budget on 28 October 2026, adds to the two-percentage-point increase previously announced by former Chancellor Rachel Reeves in 2025.

Together, the changes mean landlords holding properties in their own names will face property income tax rates of 24% for basic-rate taxpayers, 44% for higher-rate taxpayers and 49% for additional-rate taxpayers from 6 April 2027.

The increase represents a four-percentage-point rise compared with the standard income tax rates currently applicable to rental profits.

The decision has sparked criticism from property professionals, landlords and housing organisations, with the Office for Budget Responsibility (OBR) warning that the combined measures could discourage investment in rental accommodation and contribute to rising rents.

Although the government argues that its approach will help raise revenue fairly without increasing the main income tax rates on earnings, critics question whether the policy will place additional financial pressure on households already struggling with housing costs.

How Much More Tax Will Landlords Pay Under John Healey’s Crackdown?

According to HMRC’s updated property income tax guidance, published on 29 October, the new rates will apply from the 2027–28 tax year.

The measure primarily affects individuals and partnerships receiving taxable income from property letting. It is not a blanket tax on every pound of rent collected, as allowable expenses and individual circumstances influence the final liability.

For example, a landlord with £20,000 in taxable rental profit falling entirely within the basic-rate band could face an £800 higher annual income tax charge compared with the existing 20% standard rate, before accounting for any applicable tax credits or other adjustments.

The newly announced increase alone accounts for £400 of that illustrative difference.

Government projections suggest around 5% of taxpayers will experience an average annual tax increase of £225 in 2027–28 because of the additional property income tax rates.

By 2031–32, HMRC estimates approximately 2.4 million landlords could be affected.

The Treasury expects the latest increase to generate £35 million in additional revenue in 2027–28, rising sharply to £575 million in 2028–29.

Ministers maintain that the measure forms part of a broader strategy to fund household support, strengthen public finances and ensure income from assets contributes more towards government revenue.

The government also plans to consult on expanding third-party reporting of property income information, giving HMRC more data to support tax compliance. That proposal is separate from the confirmed rate increase and has not yet become a new reporting requirement.

Experts Warn Landlord Tax Rises Could Hit Tenants

The National Residential Landlords Association (NRLA) has strongly criticised the announcement, arguing that continued increases in property taxation could reduce the number of available rental homes.

Ben Beadle, chief executive of the NRLA, said in his published Budget response:

“The Chancellor has today made life harder for renters right across the country.”

Beadle argued that reduced financial returns could discourage landlords from investing in new homes while prompting existing investors to reconsider their portfolios.

The association’s concerns are supported by warnings from the OBR, which identified two potential consequences of the higher tax burden.

First, prospective landlords may become less willing to invest in the private rental sector, potentially restricting housing supply over time.

Second, some existing landlords may seek higher rents to compensate for reduced after-tax returns, particularly if fewer available properties increase their ability to raise prices.

The OBR warned that the measures risk a sustained increase in rental costs, although the eventual impact will depend on market conditions, landlord behaviour and tenant demand.

These concerns are particularly relevant in London, where expensive property purchases, mortgage repayments and maintenance costs can already make rental investments financially challenging.

Research commissioned by the NRLA and conducted by Pegasus Insight before the latest Budget found that 46% of surveyed landlords planned to increase rents in response to the earlier tax increase.

Around 35% expected to raise rents by more than originally planned, while 33% indicated they intended to sell at least one rental property.

These figures reflect landlords’ stated intentions rather than confirmed future rent increases or property sales. Nevertheless, they highlight the industry’s concern that additional taxation could influence investment decisions.

In a further analysis published on 29 October, the NRLA estimated that a basic-rate landlord letting a flat in London could need to raise monthly rent by approximately £123 to offset the combined tax increase.

Its illustrative calculations suggested equivalent increases of £73 in Manchester and £62 in Cardiff, although actual outcomes will vary considerably between properties.

For London tenants, even a smaller increase could add substantially to annual housing expenditure at a time when many households are already balancing higher living costs.

Could More Landlords Move Properties Into Limited Companies?

The latest changes could also accelerate interest in limited-company property investment, with mortgage specialists expecting landlords to reassess how their rental businesses are structured.

Steve Cox, chief commercial officer at Fleet Mortgages, suggested that the tax announcement may prompt investors, particularly those with larger portfolios, to reconsider holding rental properties personally.

“The further increase in property income tax is likely to make many landlords reconsider how they hold their rental properties,” Cox said in his published response.

Fleet Mortgages’ third-quarter Rental Barometer showed that 71% of buy-to-let mortgage applications were made through limited companies, compared with 78% in the preceding quarter.

While that represents a recent decline in the proportion of company applications, the new tax rates could renew interest in corporate ownership.

However, transferring existing rental properties into a limited company is not automatically beneficial.

Such transactions can create Capital Gains Tax liabilities, Stamp Duty Land Tax costs, mortgage refinancing expenses and additional administrative obligations.

Companies also face their own tax rules, while landlords may incur further personal taxation when withdrawing profits.

Cox emphasised that incorporation would not suit every property investor and that individual circumstances must be assessed before making changes.

Tax specialists have raised similar concerns about the increasing complexity of managing rental property finances.

Simon Misiewicz, founder and chief tax strategist at Optimise Accountants, warned in comments reported by FT Adviser that higher property income tax rates could intensify the financial pressures faced by landlords with substantial mortgage borrowing.

“Landlords cannot afford to treat tax forecasting as an annual afterthought,” he said.

His comments underline the importance of assessing taxable profits alongside actual cash flow, particularly because the income tax treatment of residential mortgage interest can mean landlords pay tax even when their remaining cash surplus is relatively small.

For highly mortgaged property investors, rising tax liabilities may influence decisions about refinancing, rent increases, portfolio restructuring or selling.

What Happens Next for Landlords and Renters?

The new property income tax rates are scheduled to take effect on 6 April 2027, with the necessary legislation expected through the Finance Bill 2026–27.

For landlords, the immediate priority will be reviewing expected rental profits, mortgage costs and projected tax liabilities before the changes take effect.

For tenants, the larger concern is whether the increases translate into higher rents or fewer available properties.

The government insists that its wider Budget package will provide financial relief to households while protecting the majority of taxpayers from additional charges.

However, the rental market presents a difficult policy challenge: increasing taxation on property investment may strengthen government revenues, but reduced returns could also discourage private landlords from supplying homes.

The broader Budget includes additional funding for social and affordable housing, including £1.5 billion intended to support approximately 10,000 more homes in England. That investment could help expand housing supply over time, although it will not immediately replace rental properties that leave the market.

With landlords already facing changes to tenancy regulation and ongoing financing pressures, John Healey’s latest tax decision has intensified scrutiny of the government’s approach to private renting.

The crucial test will come in 2027 and beyond, when the higher tax rates begin affecting landlords’ finances and the market reveals whether investors absorb the additional costs, increase rents or reduce their exposure to rental property.

For millions of renters across Britain, particularly those in London’s competitive housing market, the consequences could extend well beyond the landlords directly paying the higher tax.