A leading property agency has warned that potential tax hikes on landlords under consideration in the upcoming government spending review could worsen the UK’s ongoing housing crisis.
DJ Alexander Ltd, Scotland’s largest lettings and estate agency, has sounded the alarm over reports that Chancellor Rachel Reeves is eyeing new taxation measures aimed at private landlords. The proposals, expected to feature in both the June spending review and the autumn Budget, may include changes to Capital Gains Tax, National Insurance charges on rental income, a separate tax band for rental income, and even the introduction of VAT on residential lettings.
These potential measures are part of a broader effort by the Treasury to boost revenues without violating Labour’s manifesto commitment not to raise taxes on “working people.”
Currently, rental income is not subject to National Insurance, as it is classified as passive income. However, officials are reportedly exploring the creation of a new NI class that would bring landlord earnings in line with the self-employed—who pay NI on profits—effectively treating rental income as business profit.
Critics argue that this could unfairly penalize younger landlords still growing their portfolios, while many older landlords—who make up a significant portion of the sector and are often retired—could be exempt due to existing NI rules. According to industry data, the median age of individual landlords is 58, raising concerns of a two-tier system that discourages fresh investment.
Additional speculation surrounds the creation of a dedicated tax band for rental income, aimed at closing loopholes where income is allocated to lower-earning partners to reduce tax liabilities. This measure could potentially generate significant revenue but would also hit many small-scale landlords who currently pay minimal or no income tax.
The suggestion of applying VAT to residential property lettings has also sparked backlash. While VAT already applies to serviced accommodation and furnished holiday lettings, extending it to traditional rentals would likely see the costs passed directly onto tenants—at a time when rents are already soaring.
David Alexander, CEO of DJ Alexander Ltd, condemned the direction of the government’s thinking.
“Once again, landlords and property investors are being seen as easy targets for raising finance for the government,” Alexander said. “The last decade has already seen them subject to a series of ever more punishing tax and regulatory changes, and now they’ve come back for more.”
He warned that such changes could backfire by prompting landlords to leave the market or raise rents to offset new costs—undermining any expected revenue gains and placing additional strain on an already overheated rental market.
“The outcome of this kind of taxation would not help those needing a home,” Alexander added. “It would, instead, exacerbate the current housing crisis.”
Amid record demand for rental properties and ongoing shortages, Alexander urged the government to work collaboratively with landlords and investors to support growth in the private rental sector.
“At a time when tenants are facing delays in finding appropriate homes and property investment is being put on hold due to uncertainty over future returns, this is not the time to make the market more difficult for landlords,” he said.
“Instead, the government should be working with the sector to grow the market and improve investment conditions. That way, landlords would invest, tenants would benefit, and we could begin to address the housing emergency. This could be a win-win for all.”
The Treasury has not yet formally confirmed which measures will appear in the June review, but the debate over how to fund public services without alienating key sectors is set to intensify in the weeks ahead.