Landlords can pass tax rises to tenants, OBR warns

Nothing in the Chancellor's package stops landlords from passing their higher tax bills straight onto tenants. That's the blunt assessment from Heather Stewart, The Guardian's economics editor, who answered reader questions alongside money editor Hilary Osborne following Budget 2026, which Chancellor John Healey delivered on October 29, 2026.

The exchange covered energy prices, tax thresholds and the global pressures bearing down on the UK economy. But the sharpest question came from a reader posting as FelonMarmer, who asked what would stop landlords from simply transferring their tax increase onto tenants — "while complaining about how hard done by they are."

Can landlords pass the tax rise on?

Yes, and the government's own forecaster expects some of them to do exactly that. Stewart's answer was unambiguous: "Unfortunately, there's nothing to stop landlords passing their higher tax bills onto their tenants, aside from what the local rental market will bear."

The Office for Budget Responsibility (OBR) has gone further and modelled the effect. It suggested that one result of this and other recent policies — a 2p rise this year that followed another 2p last year — could be "a steady rise in rents," as some landlords raise rents and others exit the market altogether. Fewer landlords and higher bills is not a recipe for cheaper tenancies.

Stewart added that Housing Secretary John Healey's defence would likely rest on fairness rather than market mechanics: income made through renting out property should be taxed more heavily than income earned through work. That argument frames the tax rise as a matter of balance between earned and unearned income, not as a promise that rents will stay flat.

Why didn't Labour raise taxes on the wealthiest?

That question — pressed by readers as "why has the Chancellor left the wealthiest untouched?" — drew a two-part answer. On whether Labour could have taxed harder without paying an electoral price, Stewart said: "That's a really good question: Labour strategists are adamant that they wouldn't."

She went on: "I can't help thinking that voters were so convinced the public services were in a dire state, they could have accepted the argument that taxes needed to rise."

There's a recent precedent pointing the same way. Stewart noted that the Conservatives "didn't seem to get much electoral credit" for Jeremy Hunt's cuts to national insurance contributions in his final budgets as chancellor — desperate, in her word — suggesting tax giveaways don't necessarily buy votes. Her verdict on the counterfactual: "But we'll never know."

Should Labour have broken its manifesto promises?

Stewart also raised a second road not taken. Labour could have busted its manifesto pledges at one of two moments: either immediately after taking office, on the basis that the public finances were worse than expected, or at some point in the past year.

The fiscal pressure is concrete. The Iran war has added £14bn to the government's interest costs this year alone, according to the figures Stewart cited. That's money that goes to debt servicing rather than schools, hospitals or tax cuts, and it compounds the squeeze the Chancellor had to manage in this Budget.

What does this mean for households?

Renters face the most immediate exposure. If the OBR's "steady rise in rents" materialises, the tax increase on landlords functions partly as a transfer from property owners to tenants in tight local markets — with the ceiling set by what those markets will bear, not by government policy.

Taxpayers more broadly are absorbing the accumulated cost of two consecutive 2p rises plus an interest bill inflated by £14bn from the Iran war. How Healey balances that arithmetic against the untouched wealthiest — and whether the fairness argument survives contact with rising rents — will define the political fight over the next Budget cycle.