Landlords may soon be required to pay national insurance (NI) on rental income as the Treasury weighs new tax-raising options for Rachel Reeves’s upcoming budget.
The Times reports that officials are exploring extending NI to property earnings, a move that could generate about £2 billion annually.
The idea has been championed by Labour MPs, government aides and the Resolution Foundation think tank, which Reeves consulted before becoming chancellor.
Currently, property, pensions and savings are exempt from NI, which applies to salaries at a rate of 8%.
Sources close to budget preparations said the levy could be widened to include rental income, likening it to Labour’s plan to add VAT to private school fees.
ELECTION PLEDGE
Reeves’s allies argue the measure would not breach her election pledge to avoid raising the rates of VAT, income tax or NI, since it would only extend the scope of the levy.
Official data shows landlords earned £27 billion in net property income in 2022-23. Applying NI at 8% would have raised £2.18 billion.
With 2.2 million people receiving property income, the most common bracket is £50,000–£70,000.
For those 360,000 landlords, the change could mean an additional £1,057 bill each year. Smaller landlords could be hit harder, as NI rates fall from 8% to 2% on earnings above £50,000.
Critics warn the measure risks squeezing supply in the rental market by pushing landlords to sell up, driving rents higher for tenants.
The plan was considered before Reeves’s first budget last year but set aside. With borrowing costs at a 27-year high and a fiscal hole as large as £40 billion, the Treasury is now revisiting the proposal.
INDUSTRY REACTION
Speaking to Jeremy Vine on BBC Radio 2 earlier today, Ben Beadle, chief executive of the National Residential Landlords Association, said landlords shouldn’t be punished.
He told listeners: “We’ve got a dozen renters chasing available homes, and yes, rents are coming down from their height, but they’re still increasing 6% in the year to July, and the best way, the best way to grow ourselves out of this problem, is a to build more homes, but also to incentivise making properties available to rent.
“It might be that if a landlord gets into financial difficulty and then sells, that house is then available for a renter to buy and have their own home. We’re certainly seeing some evidence, not particularly of first-time buyers purchasing, but certainly other landlords, bigger landlords, buying up smaller landlords.
“I think if renters are struggling to pay their rent I’m going to proffer that they’re probably going to struggle to buy a property too. What we need is a more affordable, private rented sector, and the best way to do that is to increase supply and keep landlords in the sector, and to make sure it’s an attractive place to be. Don’t punish landlords.”
HIT TO LANDLORDS
Jonathan Stinton, head of intermediary relationships at Coventry Building Society, said: “This move would be another hit to landlords but it’s tenants who’ll feel the aftershock.
“The intention may be to target those with multiple properties, yet the costs would likely be passed down, impacting the very people who don’t own a home.
“A healthy property market needs a strong and competitive private rental sector.”
“A healthy property market needs a strong and competitive private rental sector. The more landlords are taxed the less appealing it is to let a property – which could ultimately lead to fewer landlords and fewer rental homes.
“The simple but powerful forces of supply and demand would then push rents higher, making it much more difficult to rent a home.
“First-time buyers who are trying to save a deposit while renting could especially struggle and worry that their homeownership dreams are pushed even further out of sight.”
COSTS WILL BE PASSED ON
Howard Levy, director of mortgage broker SPF Private Clients, said: “While it is difficult to comment until we see the finer detail, there is no information about whether this would be for properties owned in a landlord’s own name or if it would include limited company buy-to-lets.
“While we understand that Rachel Reeves needs to raise money and is looking at all ways of doing this rather than increase taxes, any further cost imposed on landlords will inevitably be reflected in rents.
“Landlords need to ensure that their business remains profitable.”
“Landlords need to ensure that their business remains profitable, so any NI payment would need to be factored into the rents they are charging – so would in effect end up being paid by tenants.”
And he added: “The issue with targeting the private rented sector is that landlords’ net yields have already been stretched over the past few years due to taxation changes, higher costs, licencing changes and higher interest rates.
“Depending on how high the level of NI the Chancellor looks to introduce, we could see many smaller landlords leaving the market. The upshot of this would then be less stock available to rent which in turn would also increase rents, assuming demand remains the same.”
SIGNIFICANT BLOW
Shaun Moore, tax and financial planning expert at Quilter, said: “The proposal to apply National Insurance to rental income would be another significant blow to the buy-to-let sector, which has already been squeezed from all angles in recent years.
“Landlords have faced a raft of changes, from the reduction in mortgage interest relief to tighter regulations and higher borrowing costs, making it increasingly difficult for amateur landlords to operate profitably. O
“n top of this, the abolition of ‘no-fault’ evictions under the Renters’ Rights Bill means landlords now face far greater challenges in regaining possession of their properties, adding another layer of complexity and risk to letting.”
TESTED TO DESTRUCTION
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “The British love affair with property could be tested to destruction.
“The latest Budget rumour is that National Insurance could be payable on the profits from rental income. Property is already one of the least tax-efficient ways to invest, and by adding to the mountain of tax paid by landlords, it may persuade even more of them to sell up.
“Landlords already face an array of taxes.”
“Landlords already face an array of taxes. They pay extra tax when they buy the property, because there’s a surcharge on top of stamp duty.
“This was hiked last October from 3% to 5%. And that’s just the start of it. When an investor rents out the property, they also pay income tax on profits from rental income.
“The tax pain continues when they come to sell, because there’s capital gains tax to worry about on investment properties.
“The annual allowance has dropped to just £3,000, and the rate is 18% for basic rate taxpayers and 24% for higher-rate taxpayers – and if the gain pushes you over a threshold you’ll pay some of this tax at a higher rate.”
THE FINAL STRAW
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “The government may feel there is a bit more fat on this calf and can take some of it but a lot of careful thought is needed. These plans might generate some additional revenue but at what cost?
“Landlords are already being clobbered by tax and regulatory changes which have reduced their profits and increased operating costs.
On top of that, the Renters’ Rights Bill is imminent. As it is, it is widely appreciated that there isn’t enough rental property on the market and if this plan to charge national insurance comes to pass, this extra tax may just be the final straw.
“This could result in in even lower supply, creating less choice, lower standards and high rents which is what governments want to avoid.
“As we have seen with the recent property tax proposals, it is all very well to put these feelers out to gauge reaction but what isn’t always appreciated that even the rumour of change can be enough to put people off.
“Anything that compromises confidence is bad news for the housing market.”
“Buyers may be wondering why they should pay stamp duty now if they won’t have to after the Budget if changes are introduced. This could have the effect of compromising the market.
“I have already spoken to two landlords this morning who are asking ‘what’s the point?’ following the NI rumours. Anything that is unsettling and compromises confidence is bad news for the housing market, even if it never actually comes to pass.”
DRIVE LANDLORDS AWAY
Timothy Douglas, head of policy and campaigns at trade body Propertymark, said: “Landlords in the private rented sector have been impacted significantly by tax changes in recent years, such as reduced rates of mortgage interest relief and increased rates of property tax when purchasing a buy-to-let or expanding their portfolios.
“The UK Government must understand the impact of these changes before embarking on further tax reforms that ultimately push up rent prices and reduce the number of much-needed properties to rent.
“Further tax imposition will mean less revenue for the Exchequer.”
“Further tax imposition will mean less revenue for the Exchequer because it will drive landlords away from the market.
“We need policies that ensure the private rented sector can increase supply to meet the demand for homes to rent, making rents more affordable. This is the only way to improve the housing market for renters, and secure increased revenue for public services.”
POLITICAL POINT SCORING
Marc von Grundherr, Director at London estate agent Benham & Reeves, said: “This move smacks of political point-scoring rather than sound housing policy.
“Applying national insurance to rental income threatens to undermine rental supply by squeezing small and medium-scale landlords, who may pull up stakes or restructure.
“We’re already seeing supply pressures in many areas, pushing costs onto tenants. A policy with such serious unintended consequences deserves more scrutiny and a strategic approach, not partisan theatre.”
INFLUENCING BEHAVIOUR
And Jonathan Handford, managing director of luxury estate agency Fine & Country, said: “At present, these ideas are no more than think tank trial balloons floated to test public sentiment.
“There is no confirmed policy, draft legislation, or timeline for implementation. However, the mere suggestion of sweeping tax changes is already influencing behaviour.
“We are seeing buyers and sellers using these rumours as leverage, some attempting to renegotiate agreed sale prices, others pushing for accelerated exchanges and completions in anticipation of reforms that have not been announced.”
MOVE TOO FAR
Siân Hemmings-Metcalfe, operations director at Inventory Base, said: “Layering yet another financial burden onto landlords, at a time when the Renters’ Rights Bill is about to reshape the sector, is a move too far.
“The focus should be on stability and encouraging long-term investment into the rental market, not short-term populism designed to plug holes in the Treasury’s coffers.
“Policies like this risk deterring responsible landlords, which ultimately undermines the very protections and standards tenants are being promised.”
TIPPING POINT
Sam Humphreys, Head of M&A at Dwelly, said: “The reality is that many landlords already operate on fine margins, and measures like this could be the tipping point that drives them out of the sector altogether.
“Once stock is lost, it is incredibly difficult to rebuild, and the people who pay the price are tenants facing rising rents and fewer housing choices.
“If the Government wants to improve affordability, it should be working to increase supply – not choking it further with punitive taxation.”
HMO’s HARDEST HIT
Vann Vogstad, Founder and CEO of COHO, the HMO management platform, said: “The Chancellor’s reported plan to introduce National Insurance on rental income in the upcoming Autumn Budget is likely to hit HMO and shared-living landlords hardest.
“These landlords typically generate higher rental income per property than standard buy-to-let investors, meaning they’ll shoulder a particularly large share of the proposed 8% levy.
“While this might seem like a clever revenue-raising move from the Treasury’s perspective, it risks triggering serious consequences for the rental market. For many landlords, already squeezed by years of tightening regulation and tax changes, this could be the final straw, prompting them to exit the sector altogether.
“The inevitable result would be a shrinking supply of rental properties.”
“The inevitable result would be a shrinking supply of rental properties and further upward pressure on rents at a time when tenants are already grappling with sky-high living costs. Even those landlords who stay in the market are likely to seek ways to recoup their losses, and raising rents will be the most direct route.
“Tenants always seem to bear the brunt of government efforts to extract more from the rental sector. In this case, HMO tenants could be particularly vulnerable.
“These properties already face mounting barriers, including growing resistance from local authorities influenced by negative media narratives around shared housing. It would be a real blow to see this vital part of the market unnecessarily eroded.”
