Landlords will need to change their approach, given regulatory and fiscal changes.
Jessica Tomlinson, Associate Director, Savills Residential Research
The end of 2025 was plagued with uncertainty surrounding the Autumn Budget and the final stages of adoption of the Renters’ Rights Act (RRA). But with the Budget behind us and a RRA implementation date of 1st May 2026 confirmed, the dust has started to settle, allowing landlords to plan for the future.
Most relevant to the rental market, the Budget announcement introduced tax changes for individual landlords, with rates of income tax from property income to increase by 2%, effective from April 2027.
Other measures announced that will affect landlords include the High Value Council Tax Surcharge on properties valued above £2m in England. This will be implemented in April 2028, with valuations undertaken in 2026. Charges will range from £2,500 per annum on properties worth £2m to £2.5m to £7,500 per annum for those in the highest band, at £5m+ and will be levied on property owners, as opposed to tenants (who will remain liable for other underlying council tax payments).
However unwelcome any tax increase, the certainty it provides does allow those landlords to now formulate their future plans that were otherwise ‘on hold’. And as with any change, their actions will depend upon their individual circumstances.
Undoubtably, changes to taxation and legislation are likely to impact confidence in the market. In our recent landlord survey, the majority of landlords surveyed reported their confidence had decreased following the November Budget and RRA.
The majority also reported their commitment to remain a landlord over the next three to six months remained unchanged. However, that commitment ebbs over a two-year horizon, with older landlords, those with smaller portfolios, and accidental landlords most likely to consider retreating from the sector.
This suggests landlords will take time to decide how to react, reviewing their options in response to changing market conditions in both the sales and lettings markets and acting as those decision-making trigger points arise. When those trigger points are reached, under the new regulatory framework, the need to make sure that notices are served in the correct legal way will also become much more important.
As a result, larger, wealthier landlords are likely to increasingly become the bedrock of supply, given their ability to better absorb the regulatory and fiscal changes.
A defining trend in the market over the past few years has been the misalignment between landlord and tenant rental expectations. As record rental growth slowed, the gap between expectations typically widened.
Over the final quarter of 2025, although that misalignment was still evident across most prime markets, the gap narrowed somewhat. In the prime regional markets, Savills agents reported almost 4 out of 5 tenants expected rental falls, with 2 in 5 landlords expecting the same. By comparison, in Q3, only 1 in 5 landlords expected downward pressure on rents.
Similarly, in prime central London, agents reported the majority of both landlords and tenants expected rental falls over the final quarter of the year. But in outer prime London, the largest gap still remains. Here, agents reported over half (54%) of landlords expected rental increases, while two thirds of tenants expected falls.
With a more formal rent review process in the offing, this indicates landlords will need to do more to justify proposed rental increases if they are to avoid the matter being referred to tribunal and the associated cost and delays that are likely to occur.
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