Tax changes in the private rented sector have brought in not more but less taxation, independent analysis commissioned by the National Residential Landlords Association has shown.

Capital Economics found that restrictions in mortgage interest relief have contributed to there being 1.2m fewer properties in the private rented sector than there otherwise could have been. And the increased number of rental properties would have brought in an additional £1.5bn in income and corporation tax revenue.

The findings come as renters across the country continue to face a shortage of homes to rent. According to Zoopla, compared to the five-year average, demand for rented housing is up 46 per cent while supply is down 38 per cent.

‘At a time when renters are struggling to find a place to live, today’s research shows that the Government has shot itself in the foot’, said NRLA chief executive Ben Beadle.

‘The decision to restrict mortgage interest relief has not only stifled investment in the very homes tenants need, it has also come at a considerable cost to the Treasury in lost revenue.

‘When you consider that the Government’s rationale for the changes has been refuted by the Institute for Fiscal Studies, it is clear that the Chancellor needs to review this misguided tax hike’.