Retirees who rely on property to supplement their income face a growing tax squeeze following the Budget, according to asset management firm Rathbones.
From April 2027, landlords will pay four percentage points more tax on property income than they do today, following increases announced across the past two Budgets.
Rates will rise from 20% to 24% for basic-rate taxpayers, 40% to 44% for higher-rate taxpayers and 45% to 49% for additional-rate taxpayers.
New Rathbones calculations illustrate how that squeeze could build over time.
Based on today’s average London rent, the four-percentage-point increase could mean almost £36,000 more tax over 25 years, £12,288 more over ten years and £1,122 more in the first year, assuming rental income rises by 2% annually.*
Charlie Newsome, senior investment director at Rathbones, says: “The landlord squeeze is tightening from all directions and, for some, the sums simply no longer stack up.
“With more than 150 pieces of lettings legislation estimated to navigate alongside rising tax and costs, being a landlord has become increasingly demanding. We’re hearing from clients considering cutting their portfolios or selling up altogether.
“But today’s landlord squeeze risks becoming tomorrow’s renter squeeze. If landlords sell up or feed higher costs through into rents, aspiring homeowners could find themselves paying more each month while having even less left over to save for a deposit.”
The change could be particularly significant for small private landlords who rely on property income in retirement.
The asset management firm says government research has found almost a third (31%) of private landlords surveyed in England were small-scale retired landlords, typically owning one or two properties and viewing their portfolios as investments to supplement retirement funds.
Newsome adds: “For a generation of retirees, bricks and mortar have become an important part of the retirement income mix. Some invested in buy-to-let during their working lives, while others acquired property through inheritance and use the rental income to supplement pensions and savings.
“Owning an additional property can make someone look asset-rich on paper, but that doesn’t necessarily mean they’re cash-rich in retirement. For some, rent helps bridge the gap between pension income and everyday spending, so a higher tax take could be felt well beyond the wealthiest landlords.”
Using average private rents across English regions and assuming rental income grows by 2% a year, Rathbones’ analysis shows the illustrative first-year impact ranges from around £380 in the North East to £1,122 in London.
Over 25 years, the cumulative impact ranges from more than £12,000 in the North East to almost £36,000 in London.
This article is taken from Landlord Today