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John Healey has lifted tax rates on income from property and savings from next year by two percentage points, doubling a rise announced by former chancellor Rachel Reeves and prompting warnings that more landlords could sell up.
Income tax on rental profits, other property income and savings interest in England, Wales and Northern Ireland will increase across all three tax bands from April, according to Budget documents published on Wednesday.
After Reeves increased these rates by two percentage points in her November 2025 Budget, the basic rate on property income will be 24 per cent, the higher rate will be 44 per cent, and the additional rate will be 49 per cent.
The tax rise on property income will yield about £35mn for the Treasury in 2027-28, jumping to £575mn in 2028-29 before falling to £455mn by 2031-32, according to government forecasts.
But James Evans, chief executive at estate agency Douglas & Gordon, said the policy was evidence of ministers continuing to “go after” private landlords and presented “another reason for landlords to exit the sector, when we are desperately in need of high-quality rental properties for tenants”.
Chris Norris, chief policy officer at the National Residential Landlords Association, said Healey’s move would be “incredibly damaging”.
“Landlords, who already face heavily squeezed margins and increased compliance costs, will have no option but to pass on these costs in the form of rents,” he added.
Since the early days of the Renters’ Rights Act, which bars landlords from evicting tenants without cause, property groups have warned it would lead to an exodus of small-scale property owners.
While there have been some signs of fewer landlords entering the market, the sell-off among landlords appears to have been tempered by falling residential property prices, particularly in London.
The Office for Budget Responsibility, the independent fiscal watchdog, said the higher rate of tax, coupled with other measures that have dented landlords’ returns, “collectively risk leading to a steady rise in rents”, as fewer potential landlords entered the market and as existing ones passed costs to renters.
Adam Jefferies, director at advisory firm PKF Littlejohn, said: “For landlords, the choices are much tougher: sell up, leave the rental market or explore holding property through a company — although this requires careful tax planning.”
Speaking in the House of Commons, Healey said he would retain the £20,000 annual cash isa allowance and that, even after the increase in tax on savings income, “88 per cent of people will pay no more tax on their savings”.
But Isabella Galliers-Pratt, senior investment director at Rathbones, said the tax rise on savings would make holding large amounts of cash on deposit increasingly unattractive, particularly for higher-rate and additional-rate taxpayers.
“Cash will always have an important role in providing liquidity, but the tax changes significantly alter the equation for money held beyond immediate needs,” she said. “For an additional-rate taxpayer facing a 49 per cent rate on taxable savings income, a 4 per cent savings rate would deliver just 2.04 per cent after tax.”