A Deepening Crisis in the Private Rental Sector
The UK’s private rented sector (PRS) is under growing financial pressure, with landlords now urging the newly appointed Minister for Housing and Treasury to urgently delay or reconsider a proposed tax hike that could further destabilize the market.
Against a backdrop of increasing regulatory burdens, rising mortgage rates, and inflation-driven maintenance costs, the looming tax increase has sparked alarm among property owners, particularly those operating smaller portfolios or managing buy-to-let properties on slim margins.
This article provides an in-depth examination of the call to delay the tax changes, the broader implications for the housing sector, and the potential outcomes if the government proceeds without reform or reconsideration.
We also address the concerns of the landlord community, economic analysts, and housing experts while providing resources and frequently asked questions to help property owners understand their rights and responsibilities during this period of policy uncertainty.
What Is the Proposed Tax Hike?
At the center of the current dispute is the phased reduction and potential removal of mortgage interest relief for landlords, combined with upcoming increases to Capital Gains Tax (CGT) rates and changes to self-assessment obligations under Making Tax Digital (MTD).
Under existing policies:
- Landlords cannot deduct full mortgage interest from rental income for tax purposes.
- Instead, they receive a basic-rate tax credit of 20%, even if they are higher or additional rate taxpayers.
- Proposed CGT alignment with income tax rates could lead to significantly higher tax liabilities upon sale.
- MTD requirements will add digital compliance burdens for landlords with incomes over £30,000 from 2026 onwards.
These financial shifts could result in many landlords operating at a net loss — or being forced to exit the market entirely — especially in areas with slower rental growth or higher operating costs.
Landlord Groups Push Back
The National Residential Landlords Association (NRLA), together with regional associations, is at the forefront of lobbying the new Minister for Housing and the Treasury to delay the implementation of these tax changes until the rental market stabilizes.
According to the NRLA’s spokesperson:
“The current policy trajectory is punishing the very people who supply housing to a growing population of renters. We need breathing room, not another layer of tax burdens.”
Smaller landlords, who make up the majority of private rental housing providers, argue that these measures disproportionately affect them. Unlike large corporate landlords, they cannot easily absorb tax increases or spread risk across a vast portfolio.
Many individual landlords have also written directly to MPs, warning that the proposed hike could result in:
- Rent increases, as costs are passed to tenants
- Reduced investment in rental stock
- Fewer properties available, worsening housing shortages
- More landlords are exiting the market
Why Now? Context Behind the Urgency
Several economic and political factors explain the renewed urgency:
- High Interest Rates
- Since late 2022, the Bank of England’s interest rate hikes have pushed mortgage costs to levels not seen since before the 2008 financial crisis. Landlords with variable rates or expiring fixed-term buy-to-let mortgages are now paying hundreds more per month.
- Energy and Maintenance Costs
- New energy performance rules require landlords to make upgrades. Rising material and labor costs further squeeze margins.
- Regulatory Pressure
- The Renters (Reform) Bill, selective licensing schemes, and the abolition of Section 21 are creating compliance complexities, often requiring legal or letting agent involvement at additional cost.
- Declining Profitability
- According to recent surveys, over 50% of landlords now say they are considering selling one or more properties in the next 12 months due to poor profitability.
Landlord bodies argue that the sector is close to a tipping point and that tax policy should be used to support — not undermine — housing provision during times of economic stress.
The Government’s Position
Although the Treasury has not yet confirmed any immediate changes, the previous government stated its commitment to “fair taxation” and reducing property speculation. Proponents of the tax hike argue that:
- It levels the playing field between homeowners and landlords.
- Encourages owner-occupation in overheated markets.
- Generates additional revenue for public services.
Critics, however, argue that this approach is short-sighted. By making the private rental sector less viable, it risks shrinking the housing supply, pushing more households into temporary accommodation or social housing systems already under immense strain.
What Could a Delay Achieve?
Landlord associations propose that delaying the tax changes could:
- Give the market time to adjust to higher interest rates and regulatory shifts.
- Prevent a surge in evictions or property disposals.
- Allow for a more balanced review of tax policy impacts on housing supply and tenant affordability.
- Provide clearer communication to affected landlords and tenants.
They also call for a broader consultation process that includes landlord representation before implementing sweeping fiscal changes.
Real-Life Impact: Case Studies
Jane – A Landlord in Manchester
Jane owns two buy-to-let properties. After paying her mortgage, maintenance, and tax obligations, her annual profit has dropped to less than £3,000. With mortgage interest relief curtailed and new digital reporting rules on the way, she’s decided to sell both properties.
“It’s no longer financially viable. I’m not a big developer — just someone who invested for a retirement income.”
Arif – A Landlord in London
Arif inherited a property and decided to rent it out. As a higher-rate taxpayer, the inability to deduct mortgage interest in full has significantly eroded his rental return.
“With the capital gains tax increasing, I’m stuck. If I sell, I pay more tax. If I hold, I lose money monthly.”
Tenant Groups Express Concern
While some tenant advocacy groups support taxing landlords more heavily to deter “profit-driven property hoarding,” others worry that the current policy is already having negative effects on renters.
Increased rents, fewer listings, and more stringent affordability checks are being reported across England and Wales. As landlords leave the sector, tenants face greater competition for fewer properties, pushing rents to record highs.
What Landlords Can Do Now
Until formal changes are announced, landlords can take proactive steps to prepare:
- Review your financial position: Forecast different tax and mortgage rate scenarios.
- Consider incorporation: Operating as a limited company may still allow for full mortgage interest deductions.
- Speak with a tax advisor: Understand the impact of CGT, MTD, and income tax on your situation.
- Keep documentation organized: Especially with MTD, digital recordkeeping is becoming a legal requirement.
- Engage with landlord associations: Groups like the NRLA offer resources, lobbying updates, and template letters for MP engagement.
Frequently Asked Questions (FAQs)
What is the proposed tax change affecting landlords?
The primary concerns are the restriction on mortgage interest relief (now replaced by a 20% tax credit), possible increases to Capital Gains Tax to align with income tax, and new digital tax reporting obligations under Making Tax Digital.
Has the new Minister made any public comments about this issue?
As of now, the newly appointed Housing and Treasury Ministers have not formally addressed the calls for a delay, but pressure from landlord groups and backbench MPs is mounting.
Will these tax changes affect all landlords?
Yes, particularly individual landlords who own properties in their name. Those operating under a limited company structure may be affected differently.
Can landlords claim full mortgage interest relief in any scenario?
Only companies can still fully deduct mortgage interest from rental income. Individuals now receive only a 20% credit on interest, regardless of their tax bracket.
Is it worth incorporating my property business to reduce tax?
Possibly, but there are legal, mortgage, and CGT considerations. Always speak with an accountant or tax advisor before making this decision.
What is Making Tax Digital (MTD) and how will it affect landlords?
MTD requires landlords earning over £30,000 in rental income (from 2026) to keep digital records and submit quarterly updates to HMRC, plus an annual return. This adds an admin burden and potential software costs.
What could happen if the government ignores these calls and goes ahead?
Experts predict a further exodus of landlords, tightening supply, escalating rents, and increased demand for social housing.
Where can landlords get help or updates on this issue?
Landlords should stay connected with reputable bodies
Useful Links
- NRLA (National Residential Landlords Association) – www.nrla.org.uk
- Property118 – www.property118.com
- Gov.uk Landlord Tax Guidance – www.gov.uk/topic/business-tax/landlord-tax
Final Thoughts
The government faces a balancing act between raising revenue, managing housing supply, and supporting tenants. However, punishing landlords through aggressive tax policy — without adequate consultation or transition measures — risks accelerating the decline of the private rental sector.
As inflation, interest rates, and compliance obligations mount, landlords are not calling for favors — they are asking for fairness, time, and stability.
Delaying the proposed tax changes, at least temporarily, could offer a much-needed reprieve for those struggling to stay afloat and ensure that tenants don’t pay the ultimate price in the form of rising rents and limited housing choices.
If you are a landlord affected by these tax changes, it’s crucial to act early. Speak with a tax professional, join a national landlord organization, and participate in lobbying efforts to ensure your voice is heard before the final decisions are made.
The British Landlords Association is a national landlords’ association for UK landlords. It is one of the largest landlord associations in the UK. Join us now for £79.95!
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