Tenants across the UK are being warned to brace for higher rents in 2026, as tax changes announced in the Autumn Budget threaten to further squeeze the supply of available rental properties.
Tax Hike to Dampen Rental Supply
In its latest house price index, Nationwide Building Society highlighted a significant concern for the rental market. Robert Gardner, Nationwide's Chief Economist, stated that the planned increase in taxes on property income is likely to discourage new investment in the sector.
"Rental supply has been constrained for some time," Gardner said, "with the potential for this to maintain upward pressure on rental growth, which has been running at all-time highs in recent years."
The specific change, detailed in the Budget, is a 2% increase to the basic, higher, and additional rates of property income tax, effective from April 2027. This will raise the rates to 22%, 42%, and 47% respectively.
Landlords at 'Breaking Point'
Property professionals report that many landlords are under severe financial strain and have little choice but to pass rising costs onto tenants. Chris Barry, Director at nationwide conveyancing firm Thomas Legal, explained that landlords have faced a decade of mounting pressures.
"Reliefs have been removed, stamp duty increased by an additional 2% on new buy-to-let purchases, and now additional taxes on dividend income are incoming," Barry noted. He pointed to the combined impact of these fiscal measures and the incoming Renters' Rights Act, which boosts tenant security but adds to landlord compliance burdens.
"The benefits of being a landlord, versus the risk, have made it an increasingly unattractive proposition," Barry added. "Many landlords simply do not have the financial wriggle room to keep on taking the hit and hiking rents is the only option left."
Tenants to 'Bear the Pain'
The consensus among experts is clear: reduced supply and increased landlord costs will lead directly to higher rents for tenants. Darryl Dhoffer, Founder of The Mortgage Geezer, agreed with Nationwide's assessment, predicting rents will continue to rise into 2026.
"Landlords face financial strain from persistently high mortgage rates, ongoing tax disadvantages and the compliance burden of the Renters' Rights Act," Dhoffer said. The Act, which ends 'no-fault' evictions and comes into force on 1 May 2026, is expected to be a tipping point for some.
Dhoffer concluded with a stark warning: "Landlord sentiment is low, leading to some selling properties, which further shrinks the supply and pressures rents upward. Tenants will undoubtedly bear a lot of the pain."
The warning from Nationwide and industry experts paints a challenging picture for the UK's rental market, where approximately one third of housing stock is privately rented. With supply constraints set to tighten further, competition for available properties is likely to intensify, placing upward pressure on rental prices at a time when many households are already facing cost-of-living pressures.
