Southern landlords face up to £22,000 tax hit
Landlords in the South East could pay more than £22,000 extra tax over 25 years, with those in the South West facing more than £19,000
Property income tax hike squeezes a generation that has turned to bricks and mortar to fund retirement
Retirees across the South of England who rely on property to supplement their income face a growing tax squeeze following the Chancellor’s decision to increase property income tax rates in the Budget, according to an analysis by Rathbones, one of the UK’s leading wealth and asset management groups.
From April 2027, landlords will pay four percentage points more tax on property income than they do today, following increases announced across the past two Budgets. Rates will rise from 20% to 24% for basic-rate taxpayers, 40% to 44% for higher-rate taxpayers and 45% to 49% for additional-rate taxpayers.
New Rathbones calculations illustrate how that squeeze could build over time across Southern England. Based on average rents, the four-percentage-point increase could mean £22,109 more tax over 25 years for landlords in the South East and £19,234 more in the South West, assuming rental income rises by 2% annually.
The South East faces the highest illustrative tax increase of any English region outside London, and a greater impact than the neighbouring East of England, where the equivalent 25-year figure is £19,956.
Faye Church, Head of Rathbones’ Guildford office, says: “The landlord squeeze is tightening from all directions and Southern England is particularly exposed.
“With more than 150 pieces of lettings legislation estimated to navigate alongside rising tax and costs, being a landlord has become increasingly demanding. We’re hearing from clients considering cutting their portfolios or selling up altogether.
“But today’s landlord squeeze risks becoming tomorrow’s renter squeeze. If landlords sell up or feed higher costs through into rents, aspiring homeowners across the South could find themselves paying more each month while having even less left over to save for a deposit.”
The change could be particularly significant for small private landlords who rely on property income in retirement. Government research** found almost a third, 31%, of private landlords surveyed in England were small-scale retired landlords, typically owning one or two properties and viewing their portfolios as investments to supplement retirement funds.
That chimes with Rathbones’ New Retirement Reality research***, which found one in ten current retirees already receive rental income from property, while 39% expect property to help fund retirement. Among those planning to use property, 42% expect to generate rental income.
Faye Church adds: “For a generation of retirees, bricks and mortar have become an important part of the retirement income mix. Some invested in buy-to-let during their working lives, while others acquired property through inheritance and use the rental income to supplement pensions and savings.
“Owning an additional property can make someone look asset-rich on paper, but that doesn’t necessarily mean they’re cash-rich in retirement. For some, rent helps bridge the gap between pension income and everyday spending, so a higher tax take could be felt well beyond the wealthiest landlords.”
Property an important part of the retirement jigsaw
Property plays a number of roles in later life. Among those expecting to use it to help fund retirement, 43% plan to downsize, while 42% expect to generate rental income. Meanwhile, 42% of respondents said tax planning and tax efficiency is an area where they most value financial advice.
Lloyd Gardner, Financial Planning Director based in Rathbones’ Exeter office, says: “Property can be an income stream, a source of capital and a later-life safety net all rolled into one. But retirees shouldn’t look at it in isolation.
“This is particularly relevant in the South West, where second-home hotspots have come under pressure: house prices fell by 6.6% in South Hams, 2.4% in Cornwall and 2.3% in North Devon in the year to the first quarter of 2026.
“As property’s tax treatment becomes less favourable and values in some popular locations weaken understanding how property sits alongside pensions, ISAs and investments, and which assets are best placed to provide income at different stages of retirement, becomes increasingly important.”
The findings reinforce Rathbones’ 2026 Don’t Bet the House research, which warns against relying too heavily on property to fund retirement. The research found that weaker house-price growth, higher borrowing costs and an increasingly demanding tax and regulatory environment have fundamentally changed the investment case for bricks and mortar.
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