Kemi Badenoch has warned Rachel Reeves her move to hike tax on landlords will drive rental increases, with tenants already facing record highs across Britain.
Ms Reeves delivered her Budget in the Commons on Wednesday, with the chancellor unveiling £26bn in tax rises and leaving £22bn in fiscal headroom as she set out plans to plug the gap in the public finances.
The tax increases, which come on top of the £40bn of rises announced last year, will be delivered through a freeze on personal tax thresholds and a series of smaller measures. It brings the tax take to an all-time high of 38 per cent of GDP in 2030–31.
Among the announcements was a two percentage point rise in tax rates on property, savings and dividend income from April 2027, meaning landlords will face higher tax on their rental income.
The chancellor told MPs: “Currently, a landlord with an income of £25,000 will pay nearly £1,200 less in tax than their tenant with the same salary because no National Insurance is charged on property, dividend or savings income.
“It’s not fair that the tax system treats different types of income so differently, and so I will increase the basic and higher rate of tax on property, savings and dividend income by two percentage points, and the additional rate of tax on property and savings income by two percentage points.
“Even after these reforms, 90% of taxpayers will still pay no tax at all on their savings.”
Conservative leader Kemi Badenoch took aim at the policy in her response to the Budget, saying: “Hiking tax on landlords will only push up rents. It will push landlords out of the market – the people who will suffer are the tenants.”
The Office for Budget Responsibility’s fiscal outlook also warned that the policy could result in rising rents, stating: “The measures announced in this Budget reduce returns to private landlords, following various measures over the past 10 years that have also reduced returns.
“This successive eroding of private landlord returns will likely reduce the supply of rental property over the longer run. This risks a steady long-term rise in rents if demand outstrips supply.”
Rental prices across Britain have already soared to unprecedented levels, with new highs recorded in the third quarter of this year, according to Rightmove. The average advertised rent across Britain, excluding London, now stands at a record £1,385 per month, a 3.1 per cent increase on the same period last year.
Ben Beadle, chief executive of the National Residential Landlords Association, said the rise in rents would only continue as a result of Ms Reeves’s policy. He said: “Despite claims of tackling cost-of-living pressures, the Government is pursuing a policy that the Office for Budget Responsibility has made clear will drive up rents.
“Almost one million new homes to rent are needed by 2031. But this Budget will clobber tenants with higher costs while doing nothing to improve access to the homes people need.”
Similarly, Mark Hughes from Pure Property Finance said: “Reeves introducing this new approach risks discouraging property investment, reducing rental supply and could potentially drive up huge costs for tenants.
“Many landlords are already facing rising interest rates and compliance burdens, and this additional tax pressure could force them into leaving the market.”
Renters cannot afford any such rises, according to Ben Twomey, chief executive of Generation Rent. Mr Twomey said: “For too long the tax system has been rigged against renters. It’s scandalous that landlords pay less tax on their incomes than their tenants.”
He added: “Meanwhile, landlords with mortgages are already charging as much as their tenants can bear, so will struggle to push them any higher.”
Anny Cullum, political officer for community union Acorn, said landlords should not be allowed to pass the tax rise onto tenants through higher rents. She said: “Those with the broadest shoulders paying a fairer share of tax is welcome, but it’s important that landlords aren’t able to pass the bill to some of those squeezed the most by the cost-of-living crisis, including private renters.
“Rents have been rising year on year, taking up an average of 36 per cent of people’s pay. We need to bring them down, not add to them, and the Government can do that by implementing rent controls.
“Instead of tax breaks and public money subsidising private landlords, we need to reinvest in building and maintaining our social homes – breaking the over-reliance on private rentals and guaranteeing safe, secure and affordable homes for all.”
Zoopla’s rental market report from September 2025 warned that the “affordability of renting is a growing challenge for renters and is holding back rental inflation”. The report said: “The average UK rent has increased by just under £80 a week over the last five years (£4,100 more a year), compounding the cost-of-living pressures on renting households.
“Many private renters are on below-average household incomes. Almost a third rely on housing benefit to support rental costs, where the allowance has not kept pace with rental increases.
“This means affordability is a growing constraint on renters that impacts the pace of rent inflation, which has slowed sharply across much of the country over the last year.”
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