Officials drawing up the next Budget must remember the consequences of higher taxes, Knight Frank warns.

Tom Bill, head of UK residential research for Knight Frank, warns that threats of higher taxes and applying national insurance to rental income has already impacted the prime market.

The number of new lettings properties coming to the London market in the year to August was 8% below the previous 12-month period, Knight Frank data shows.

As supply slips, rental value growth continues to hold firm.

Rents grew by an average of 2% in prime outer London in the year to August, which was the strongest figure since October 2024. An increase of 1.8% over a period of six months was the strongest such rise in 18 months.

Meanwhile, in prime central London, average rents rose by 1.5% over the year to August, which was the second-highest rise over the last 12 months.

Bill said: “Those drawing up the Budget and reportedly considering the National Insurance rise will hopefully remember the simple rule that if you tax an activity, you get less of it. If they don’t, it certainly won’t make life easier for tenants.”