The 2025 Autumn Budget delivered a series of tax and fiscal measures aimed squarely at property income — and although the changes are directed at landlords, it is tenants who are likely to feel the impact most acutely in the months and years ahead.
While the Government’s intention is to raise revenue and “rebalance” taxation, the practical effect is to increase the cost of providing rental housing. With margins already tight, many landlords will pass these additional costs on to tenants, and some may exit the sector altogether. This blog explains why tenants can expect higher rents as a direct consequence of the Budget.
1. What the Budget Changed
Higher Tax on Property Income
From April 2027, tax on rental income will rise by 2 percentage points across the board.
-
Basic rate taxpayers will see the rate on rental income increase from 20% to 22%.
-
Higher rate landlords will pay 42%.
-
Additional rate landlords will pay 47%.
For landlords with mortgages, maintenance expenses, and compliance costs, this additional tax significantly reduces net returns.
Frozen Tax Thresholds
Income tax thresholds will remain frozen for several more years. As landlords’ incomes rise with inflation, many will be pushed into higher tax bands without earning more in real terms. This “fiscal drag” raises their tax bill even further.
Growing Compliance and Operational Costs
The Budget arrives on top of an already heavy burden:
-
Stricter compliance and safety regulations
-
Higher finance costs
-
Reduced allowances and reliefs over recent years
The cumulative effect is that many rental businesses are already operating on slim margins, especially in low-yield areas.
2. Why These Changes Lead to Higher Rents
Landlords Must Maintain Viability
Most landlords do not run high-profit operations. Many rely on rental income to cover mortgages, maintenance, insurance, and regulatory compliance.
When taxes rise, they face a simple choice:
-
Raise rents, or
-
Exit the market.
For most, absorbing the additional cost is not financially sustainable.
Evidence Suggests Rent Increases Are Likely
Industry surveys consistently show that the overwhelming majority of landlords intend to raise rents to offset higher taxes and costs. A significant proportion also report that they are considering selling properties that will no longer be viable.
Falling Supply, Rising Demand
When landlords sell, those properties do not reliably return to the rental market. Some are bought by owner-occupiers or converted to short-term lets.
With fewer homes available to rent, but strong demand, the market naturally drives rents upward.
3. What Tenants Should Expect
Gradual But Persistent Rent Increases
Not all rents will rise immediately, but over the next 1–3 years:
-
Renewal rents are likely to rise
-
New tenancy rents may jump more sharply
-
Areas with already limited supply may see faster increases
More Competitive Rental Market
If landlords exit the sector, tenants may face fewer choices and quicker application processes. Desirable properties may attract more interest, making it harder for renters to negotiate.
Potential Tightening of Tenant Criteria
Some landlords may become more selective:
-
Higher minimum income requirements
-
Stricter referencing
-
Reduced flexibility on pets or guarantors
This is a common reaction when margins tighten and risk increases.
4. What Tenants Can Do Now
Even though tenants cannot control tax policy, they can take practical steps:
Seek Longer Fixed Terms
A longer tenancy agreement can lock in current rent levels and shield tenants from short-term increases.
Negotiate Early
If your tenancy is due for renewal:
-
Start discussions well in advance
-
Ask whether a longer term or specific commitments could keep rent stable
Plan Ahead for Moving
If you expect to move within the next year, monitor the market early — competition may increase.
Review Budgeting and Benefits
Those on lower incomes may wish to check housing benefit or Local Housing Allowance eligibility to ensure they are receiving full support.
Conclusion
Although the Autumn Budget targets landlords directly, its effects will be felt most immediately by tenants. The combination of increased tax on rental income, frozen tax thresholds, and ever-rising compliance costs means landlords’ profits will shrink unless rents rise.
In many cases, rent increases are not a choice — they are a necessity for landlords to remain viable. And as some properties leave the rental market, reduced supply will apply further upward pressure on rents.
Tenants should prepare for a market where higher rents, stronger competition, and stricter letting criteria become more common. Early planning and proactive negotiation can help soften the impact, but the broader trend is clear: renters are likely to pay more as a direct result of Budget changes.