The Intermediary Mortgage Lenders Association (IMLA) has cautioned that extending National Insurance to landlords’ rental income would have damaging consequences for smaller landlords operating in their own names.

The proposal, reportedly under consideration ahead of next month’s Budget, would not apply to incorporated landlords, effectively creating what IMLA described as a “two-tier” system favouring larger, corporate property owners.

The trade body’s research found that 58% of higher-rate taxpayers who let properties personally would see their combined tax and NI bills exceed 100% of their rental profits, leaving them paying more to the Treasury than they earn.

Landlords have already faced a raft of tax and regulatory changes, including the removal of mortgage interest relief, higher capital gains tax liabilities and the stamp duty surcharge. The number of buy-to-let properties has fallen by more than 110,000 since 2022, a trend IMLA warns could accelerate if NI is added to landlords’ tax burden.

According to its latest report, The November Budget 2025: Surveying the Options, the measure could raise around £2.2 billion a year but at the cost of further shrinking the rental market and pushing rents higher.

Kate Davies, executive director of IMLA, said: “Extending National Insurance to landlords’ rental income may appear an easy way to raise money, but in practice it would hit exactly the wrong people.

“It would punish smaller, often part-time landlords who provide homes for more than four million UK households, while leaving larger incorporated operators untouched. That is both unfair and economically counterproductive.”

She added: “This would be a short-sighted and self-defeating move. Fewer rental homes mean higher rents, less mobility, and more pressure on public housing.

“At a time when the UK needs more investment in property, not less, this proposal risks driving it away.”