Landlords Head for the Exit: UK Budget Meets Spain’s Rental Squeeze
Landlords Head for the Exit: The UK Budget Tax Rise, Spain's Rental Squeeze and What It Means for You
Britain's Autumn Budget has raised tax on rental income for the second year running, and letting agents say landlords are already asking how to sell. It mirrors what we have been seeing in Spain, where long-term rentals are disappearing after October's housing decrees. Here is what has changed in both countries, and what it means if you own, let or rent property in either.
In brief
- The UK Budget on 28 October doubled the extra income tax on rental profits. From April 2027, landlords will pay 24%, 44% or 49%.
- 57% of letting agents polled by Propertymark have had landlords asking about leaving the rental market since the Budget.
- Savills expects UK rents to rise by around 15% by 2031, and 16% in London.
- In Spain, advertised rentals fell 19% in a single month after the housing decrees, including 17% in Alicante city.
- If you live in the UK and let out a home in Spain, the higher UK rates are set to reach that income too.
What the Budget changed
On 28 October, Chancellor John Healey doubled the rental income surcharge that his predecessor, Rachel Reeves, announced a year earlier. Instead of paying 2 percentage points more than the normal income tax rates from April 2027, landlords who own property in their own name will now pay 4 points more.
| Income tax band | Normal rate | Rental profits from April 2027 |
|---|---|---|
| Basic rate | 20% | 24% |
| Higher rate | 40% | 44% |
| Additional rate | 45% | 49% |
The new rates apply in England, Wales and Northern Ireland; Scotland sets its own. Landlords who hold property through a limited company pay corporation tax instead and are not affected by this change. The Office for Budget Responsibility expects it to raise £455 million by 2031-32.
It comes on top of two other changes. From April 2027, Making Tax Digital requires landlords with qualifying income over £30,000 to keep digital records and report to HMRC every quarter. And since 1 May 2026, the Renters' Rights Act has ended "no-fault" Section 21 evictions in England.
UK landlords are heading for the exit
Within days of the Budget, 57% of the agents who answered a snapshot poll by Propertymark, which represents almost 20,000 UK estate and letting agents, said landlords had asked them about leaving the private rented sector. Between them, those landlords own an estimated 2,860 homes.
The selling started well before this Budget. Data from TwentyEA suggests more than 800,000 former rental homes have been sold since 2020, and they now make up around 15% of all homes on the market. Most are bought by people who will live in them, so they leave the rental market for good. England now has more than five million privately rented homes, but the sector's share of all housing has slipped from 20.3% in 2016 to 19.5%.
Savills forecasts that average rents will rise by around 15% by 2031, and 16% in London. That would add more than £2,500 a year to a typical rent, and around £5,000 in the capital. The government disputes that landlords are leaving in large numbers, and says the Renters' Rights Act protects tenants from above-market rent increases and bidding wars.
You will have substantially less choice available to you.
Lucian Cook, head of residential research at Savills, on what fewer landlords means for people looking for a home to rent
Spain: the same squeeze, a different trigger
In Spain the pressure comes from regulation rather than tax. After the government approved its housing decrees in October, the number of rental homes advertised on idealista fell 19% in a single month, with 26,531 listings disappearing between 25 September and 25 October. Some of those were seasonal lets, but the drop reached almost every part of the country.
Rental listings fell fastest in the big cities
Change in advertised rentals, 25 September to 25 October 2026, %
As we explained in our post on Spain's new housing decrees, many small landlords are pausing, selling or switching to seasonal lets while the rules settle. On 12 November, Congress's standing committee rejected the decree with automatic renewals and compensation for non-renewal (RDL 28/2026), so it will not apply from 15 November. The rules could change again after the general election, so check the latest position before you act.
Fewer homes are not bringing rents down. Asking rents in Alicante city were 7.3% higher in August than a year earlier.
| United Kingdom | Spain | |
|---|---|---|
| What is pushing landlords out | Higher tax on rental profits from April 2027, plus new tenancy rules | Housing decrees on renewals, compensation and seasonal lets |
| What landlords are doing | Selling, mostly to people who will live in the home | Selling, pausing or switching to seasonal lets |
| What tenants face | Fewer homes, with rents forecast to rise around 15% by 2031 | Fewer listings, and rents still rising |
What this means for you
If you own property in both countries, or are moving from one to the other, these changes affect each other. The details of your situation matter far more than the headlines.
If you live in the UK and let a home in Spain
You already pay Spanish non-resident income tax at 24% on the gross rent, with no deduction for expenses. You must also declare that income to HMRC, which normally lets you offset the Spanish tax against your UK bill under the UK–Spain tax treaty.
The new UK rates are set to cover rental profits from property abroad as well as at home, so from April 2027 higher-rate taxpayers in particular could owe more in Britain. It is worth reviewing your figures before the 2027/28 tax year starts.
If you're selling a UK buy-to-let to move to Spain
Plan the order of events before you sell. Once you are tax resident in Spain, Spain taxes gains you make anywhere in the world, at rates from 19% to 30%, and the UK can still tax gains on UK property after you have left. The tax treaty stops you paying twice in full, but the timing of the sale, your move and your residency changes who taxes the gain and how much.
Read more on why timing your move to Spain matters.
If you let long term in Spain and are thinking of selling
Don't sell or switch on the strength of headlines. Seasonal lets are regulated too, and selling has its own costs: capital gains tax, the municipal plusvalía tax and, if you are not resident in Spain, a 3% retention that the buyer must hold back from the price and pay to the Spanish tax office.
Check what your contract and the current rules actually require before deciding.
If you rent your home in Spain
With fewer long-term homes on the market, look after the one you have. For contracts signed since March 2019, a main-residence lease with an individual landlord can usually run for at least five years (seven if the landlord is a company), even if it was signed for one year.
Keep your contract, receipts and correspondence in order in case you need to rely on them.
Selling, letting or moving between the UK and Spain?
SGM Abogados advises British clients on Spanish property sales, rental contracts and cross-border tax from our offices in Benijófar and San Javier. Talk to us before you sell, switch or sign.
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