MPs clash over property income tax amid warnings it will hurt landlords and tenants

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MPs clash over property income tax amid warnings it will hurt landlords and tenants

A Conservative MP claims Labour’s decision to raise tax rates on property income will hurt renters and reduce rental supply.

The Autumn Budget increased tax rates on dividends, property, and savings income by 2 percentage points.

In a Parliamentary debate on the 2026-2027 income tax charge, the Conservatives argued that many landlords are ordinary people who will struggle to afford the higher taxes.

The Finance Bill 2026, which implements these Budget measures into law, included a proposed Conservative clause requiring the government to publish an assessment within six months of the impact of the new property income tax.

This clause was not agreed to, but could potentially be reinstated later in the parliamentary process.

Landlords are not people gaming the system

Speaking during the debate, Shadow Financial Secretary Gareth Davies, pointed out the government’s stereotype of landlords is far different than the reality.

He told MPs: “Government members may take great satisfaction in what could be described as a war on landlords, but we should pause and remind ourselves who many landlords are.

“They are not barons or vast landowners; they are ordinary people doing what we have encouraged them to do for decades: taking responsibility for their future. They are the couple, one parent works long hours in a steady job, and the other juggles work and family life, who save carefully and invest in a small property because they know that the state pension alone might not be enough when they retire.

“They are the retired couple who inherit a modest flat from their parents, a flat that is not a windfall, but a source of security in later life, and who rent it out to supplement a fixed income.

“These are not people gaming the system, as many Labour Members have tried to suggest in the past, but people responding to it. They are good people. Forty-four of them are Labour MPs.”

Mr Davies warns the measures will hurt landlords and tenants as he called for the government to publish an assessment of the impact of imposing new rates of income tax on property income.

He said: “This new tax does not just hit landlords, though, it hits renters, too. The British Property Federation and the Office for Budgetary Responsibility have both warned that this measure could restrict the supply of private rental properties, adding pressure to an already strained market.

“The Royal Institution of Chartered Surveyors and the National Residential Landlords Association (NRLA) both say that rents will rise faster as a direct result. New clause 12 in my name seeks to force the government not to rely on their stereotypes about landlords, but to assess the impact of their new renters’ tax on both the supply and cost of private rental properties.”

Not fair that renters pays a higher rate of tax on their income than landlords

The Exchequer Secretary, Dan Tomlinson, claimed the landlord tax rise is fair and reasonable and rejected the Conservatives’ clause calling for an impact assessment.

He said: “Those with property, savings or dividend income currently pay lower rates of tax than those whose income comes from employment as they do not pay national insurance contributions.

“It is not fair that the tax system treats these types of income so differently. For example, it is not fair that a renter pays a higher rate of tax on their income than the landlord from whom they are renting their property.”

He adds: “The shadow Financial Secretary raised the change landlord income tax, the two percentage point increase. I fully understand, as does he, that there are many reasons why people end up becoming landlords.

“We want to make sure that the taxation is fair and reasonable, which is why landlords do not pay national insurance in the way that their tenants do, and it is why we have taken steps to reduce, but not close in full, the gap in tax treatment, with the two percentage point increase. Landlords will still typically pay a lower rate of tax than their tenants, but the gap will be reduced following the measures set out in the Budget.”

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