Almost nine in 10 (88%) landlords are concerned about the 2% rise in income tax rates applying to all rental income from properties held in personal names, with many calling on the government to resist imposing further costs, Pegasus Insight has revealed.

The firm’s latest Landlord Trends research comes ahead of the government’s Budget announcement on 28 October, with the latest findings revealing widespread concern among landlords about the cumulative impact of tax and regulatory changes affecting the private rented sector (PRS).

Landlords have indicated that the consequences will not necessarily be absorbed within their businesses. Almost two thirds (64%) said they will look to recoup losses through higher rents, while 83% agree that tax and regulatory changes will make them more selective about the tenants to whom they are prepared to let.

Worry about the practical operation of the new regime under the Renters’ Rights Act was also significant, with 91% of landlords saying they are “very concerned” about potential court backlogs when seeking to regain possession of a property.

Pegasus Insight’s latest research comes after it already highlighted the sensitivity of landlords' behaviour to changes in taxation and regulation, with landlords responding by selling property, incorporating or delaying further investment.

Against this backdrop, the latest findings suggest further tax increases could have consequences beyond landlords themselves, with more than a quarter of tenants expecting rents to rise as landlords pass on the cost of complying with the Renters’ Rights Act.

Founder and director at Pegasus Insight, Mark Long, stated: "Landlords are already preparing for significant change under the Renters’ Rights Act, and the prospect of further tax changes in October’s Budget is adding to the uncertainty facing the sector.

"The growing concern about the courts should also give policymakers pause. The new possession regime will depend heavily on a court system landlords can have confidence in, so ensuring it has the capacity to cope must be a priority.

"The PRS needs a period of stability. Further tax increases or additional costs could change landlord behaviour in ways that ultimately affect tenants through higher rents, reduced choice or fewer homes available to rent. The Budget should not add to those pressures."

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