Retired landlords face a growing financial squeeze after the Chancellor announced plans to increase property income tax rates, according to analysis by wealth management group Rathbones.

From April 2027, property income tax rates will rise by four percentage points across all tax bands, taking the basic rate from 20% to 24%, the higher rate from 40% to 44% and the additional rate from 45% to 49%.

The increases, announced across the past two Budgets, could add almost £36,000 to the tax bill of a landlord receiving the average London rent over 25 years, according to Rathbones’ calculations.

The additional tax would amount to £12,288 over ten years and £1,122 in the first year, assuming rental income increases by 2% annually.

The changes could be particularly significant for older, smaller-scale landlords who have come to rely on property as a source of retirement income.

Government research found that almost a third (31%) of private landlords surveyed in England were retired landlords operating on a small scale, typically owning just one or two properties and viewing them as investments to supplement their retirement funds.

Rathbones’ New Retirement Reality research found that one in ten current retirees already receive rental income, while 39% expect property to play a role in funding their retirement. Of those planning to use property, 42% expect to generate rental income.

Charlie Newsome, senior investment director at Rathbones, said the combination of higher taxes, rising costs and increasing regulatory requirements was making property ownership more challenging.

“The landlord squeeze is tightening from all directions and, for some, the sums simply no longer stack up,” he said.

“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.”

However, he warned that landlords passing on higher costs through increased rents could create additional pressure for tenants, particularly those trying to save for a first home.

“Today’s landlord squeeze risks becoming tomorrow’s renter squeeze,” he said. “If landlords sell up or feed higher costs through into rents, aspiring homeowners could find themselves paying more each month while having even less left over to save for a deposit.”

Rathbones’ analysis, based on average private rents across England and assuming annual rental income growth of 2%, suggests the financial impact will vary considerably by region.

London landlords face the largest illustrative increase, at £1,122 in the first year and almost £36,000 over 25 years.

In the South East, the additional tax could reach £22,109 over the same period, while landlords in the South West could face an increase of £19,234.

The smallest illustrative impact is in the North East, where the additional tax is estimated at £379 in the first year and £12,146 over 25 years.

Michele Rogers, head of Rathbones’ Exeter office, said the changes could also affect owners of holiday properties, particularly in the South West, which has England’s highest concentration of holiday homes.

She highlighted areas including Cornwall and South Hams in Devon as places where owners could feel the impact.

“The impact won’t be confined to traditional buy-to-let landlords,” she said.

However, she cautioned that higher taxes would not necessarily lead to more properties becoming available for sale, pointing to landlords who are already struggling to find buyers.

“Higher taxes can increase the incentive to sell, but they can’t create the demand needed to complete a sale,” she said.

Despite the changing tax and regulatory environment, property continues to play several roles in retirement planning, providing rental income, capital through downsizing and a potential source of funding for later-life care.

Among those expecting to use property to fund their retirement, 43% plan to downsize. When it comes to later-life care, 35% expect to use the proceeds from selling a property, while 18% anticipate using equity release on their main home.

Generating a regular income remains a priority, with 38% focused on maintaining their desired lifestyle and 33% looking to cover essential living costs.

Against this backdrop, tax planning and tax efficiency are the areas where people most value financial advice, cited by 42% of respondents.

Ed Wood, financial planning director at Rathbones, said retirees needed to consider property as part of their wider financial arrangements rather than relying on it in isolation.

“Property can be an income stream, a source of capital and a later-life safety net all rolled into one,” he said.

“But retirees shouldn’t look at it in isolation. As its tax treatment becomes less favourable, 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.”