Landlords unlikely to exit despite rental income tax increase, says Molo distribution director

In yesterday’s Budget, the chancellor announced that income tax on property rental income will increase by two percentage points from April 2027.

Martin Sims, distribution director at Molo Finance (pictured above) considered what the increase could mean for landlords and if it might encourage more property investors to consider limited company ownership.

Most landlords have become accustomed to the idea that owning rental property is going to cost them more than it used to, according to Martin.

He questioned whether another two percentage points was enough to change their outlook on property investment entirely.

“My feeling is that, for most established landlords, it probably isn’t”, said Martin.

“They’ll go back to the numbers and work out whether their properties still make financial sense. Some might sell, of course, but I think we need to be careful about assuming every additional cost is going to send another wave of landlords heading for the exit.

“I wouldn’t be surprised if this prompts a few more landlords to look seriously at how they own their properties. We’ve already seen a move towards limited companies, and the higher tax burden on personally held properties could encourage others to consider doing the same.

“Of course, transferring an existing property into a company isn’t necessarily straightforward or financially worthwhile, so there’s quite a difference between thinking about incorporation and actually going ahead with it.

“Another tax increase might change how landlords choose to invest in property, but it doesn’t necessarily mean they’ll stop investing altogether.

“There’s a conversation to be had with brokers here, particularly when landlords come to remortgage or start looking at their next purchase. I’d expect quite a few will be asking whether the way they’ve always done things still makes financial sense.”