Landlords face paying National Insurance on rental income
9:29 AM, 28th August 2025, 7 months ago
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Millions of landlords could be hit by a plan to impose National Insurance contributions on rental income to generate around £2 billion in additional revenue.
Treasury sources have told The Times that the Chancellor, Rachel Reeves, wants to target ‘unearned income’.
The idea is being floated to tackle a £40 billion deficit in public finances, and it is being championed by some Labour MPs.
In doing so, Ms Reeves will maintain her bid to avoid breaching pre-election commitments not to increase VAT, income tax or existing National Insurance rates.
Landlords could sell up
Critics of the plan are already lining up with Sarah Coles, the head of personal finance at Hargreaves Lansdown, saying: “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.”
She added that landlords already face an array of taxes including a stamp duty surcharge, paying income tax on profits from rental income and because the income tax thresholds have been frozen since 2021, more landlords are paying higher rates and facing bigger tax bills.
Landlords have ‘unearned income’
The Times reports sources close to the Budget preparations saying that applying National Insurance to rental income would broaden the scope of earnings subject to the levy, rather than altering its rate.
That’s a nuance likened to the recent decision to impose VAT on private school fees.
One Labour insider said: “Property income is a significant potential extra source of funds.”
They added that landlords were seen as a way of targeting ‘unearned revenue’.
Official data shows that net property income reached £27 billion in 2022-23, so an 8% National Insurance charge on this amount could yield £2.18 billion.
Smaller landlords hit
However, the structure of the levy could disproportionately impact smaller landlords.
For instance, those earning between £50,000 and £70,000, a group of 360,000 landlords generating £4.76 billion, could face an additional annual bill of £1,057 if the standard 8% rate is applied.
The existing National Insurance framework reduces to 2% for earnings above £50,000, which could exacerbate the burden on smaller property owners.
The proposal, initially floated by the Resolution Foundation last September under the leadership of Torsten Bell, who has since become a Labour MP and key figure in Ms Reeves’s budget team, was shelved but has resurfaced as a viable option.
With 2.2 million individuals reporting property income and 19% of households renting privately, according to the English Housing Survey, the policy could have far-reaching implications.
Accelerate the landlord exodus
Shaun Moore, a 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.
“Introducing an additional tax burden risks accelerating the exodus of landlords from the market, further reducing the supply of rental properties at a time when demand remains high.”
He added: “This imbalance will inevitably push rents even higher, worsening affordability for tenants and deepening the housing crisis.
“Similarly, the addition of NI would almost certainly be passed on to renters through higher rents, compounding the problem.”
Tags:
Landlord tax changes, Landlords, National Insurance rental income, property tax UK, public finance shortfall, Rachel Reeves budget, UK Budget 2025, unearned income tax
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Member Since July 2013 - Comments: 1996 - Articles: 21
2:08 PM, 3rd September 2025, About 7 months ago
Reply to the comment left by Beaver at 03/09/2025 – 13:59
Starmer and the Labour Party are deliberately coy about who is a “working person”. According to historian David Starkey it is someone with no savings, who lives from month to month. Almost by definition PRS landlords are not working people because they own assets.
Having promised growth, Labour has reverted to “soaking the rich” and driving wealth-creators away.
Member Since September 2015 - Comments: 1013
2:28 PM, 3rd September 2025, About 7 months ago
Reply to the comment left by Beaver at 03/09/2025 – 13:59
….. unless their real aim IS to crash the economy!?!?!?
Member Since May 2018 - Comments: 1999
2:51 PM, 3rd September 2025, About 7 months ago
Reply to the comment left by Gromit at 03/09/2025 – 14:28
Those kinds of comments always seem to me to sound a bit like conspiracy theories and I suspect that the truth is more nuanced.
I think that the truth is that the left-wingers don’t care that much about the overall state of the market because they don’t believe in free market economics anyway. The left-wingers also don’t care about the PRS because they don’t believe anybody should own anything and where people live should be dictated by politicians and civil servants on the basis of ‘need’. And the unions don’t really care about anybody who isn’t in a union or can’t be strong-armed into joining.
I suspect that the truth is more related to the dishonesty, incompetence, self-interest and hypocrisy of politicians who make it to the top of the greasy pole than anything that might truly be a conspiracy theory. Even left-wing economy academics understand that communist societies have a problem with incentive. One of the most communist countries is Vietnam and even they’ve introduced some incentives to encourage private entrepreneurship.
61% of employment is in small business. That’s more than 50% of the economy. Hurting that hurts everyone.
We all know that labour cannot house everybody without using the PRS. They haven’t got the money to build the 1.5 million homes Angela Rayner says she’s going to build, and Keir Starmer says she’s going to build. That’s even if Angela does cough up for the extra stamp-duty land tax she owes on her flat in Hove “…oops sorry, I didn’t know..” In a public position like yours you should have checked, shouldn’t you Angela? It’s not as if you didn’t have form with your history of buying an ex-council house renting it out and selling it as your Principle Private Residence.
Left-wingers don’t want to hear about the reality of markets because it doesn’t fit with their belief system. They are arrogant. They believe that only clever people like them can fix the world, only clever people like them should decide where people live….whilst they then go off and live in their fancy seaside properties.
But their belief system is just a belief system and it’s every bit as damaging to the > half the economy that’s in small business, to ordinary people, to the lives of ordinary families as the belief system of the people who flew a plane into the World Trade Center in New York.
Their incompetence and their venality hurt everyone.
Member Since October 2013 - Comments: 1630 - Articles: 3
2:56 PM, 3rd September 2025, About 7 months ago
Reply to the comment left by Northern Observer at 03/09/2025 – 08:10
Whatever abomination she unleashes on November 26th will only deal with the current situation. But that will get worse, and hence she will need yet more money a few months later. This cannot continue with the private sector always picking up the bill. Labour must accept they need to reform the public sector and cut public spending, drive up productivity, reduce employer pension contributions, dramatically cut benefits, stop the illegal migration racket, and reverse the ideological ‘wealth’ attacks (private schools, IHT, pensions, CGT…) because they are seriously damaging the economy.
But none of that will happen. So, what next?
Member Since March 2024 - Comments: 281
2:56 PM, 3rd September 2025, About 7 months ago
Reply to the comment left by David100 at 03/09/2025 – 14:06
I wouldn’t count on any tax changes only taking effect from next April.
Whilst property CGT was not changed last October, normal CGT was increased to match – and importantly it came in very quickly. Made a bit of a mess of self assessment with warnings about calculating correctly for disposals before of after the in year change date.
Member Since October 2013 - Comments: 1630 - Articles: 3
2:58 PM, 3rd September 2025, About 7 months ago
Reply to the comment left by Sally Robinson at 03/09/2025 – 11:03
They know we can’t act in time, and are likely to make any taxes immediate.
Member Since October 2013 - Comments: 1630 - Articles: 3
3:02 PM, 3rd September 2025, About 7 months ago
Reply to the comment left by Beaver at 03/09/2025 – 13:59
I heard on BBC 5 Live this morning that Labour’s latest soundbite is ‘we are creating growth that you can feel in your pocket’. Ooer, Matron!
Member Since May 2018 - Comments: 1999
3:05 PM, 3rd September 2025, About 7 months ago
Reply to the comment left by NewYorkie at 03/09/2025 – 14:56
What’s next is that if Rachel introduces NI on rental income this will drive up rents as landlords do the only thing they can and pass the tax on as rent increases. As the RRB comes in landlords will have to be far more careful about who they rent properties to. Some will exit the market because the risk isn’t worth it. Some landlords may lease their properties to Mears, Serco, or Clearspring Ready Homes to house asylum seekers because these companies are lower risk than housing e.g. social housing tenants.
Rents will continue to climb because of the increasing scarcity of property, and eventually Angela Rayner will go off to live in her retirement home on the South Coast, well away from rainy Tameside.
Member Since May 2015 - Comments: 2188 - Articles: 2
3:39 PM, 3rd September 2025, About 7 months ago
Reply to the comment left by NewYorkie at 03/09/2025 – 15:02
Labour must be getting lessons from Trump, who says that inflation is falling in the US.
Member Since May 2018 - Comments: 1999
3:46 PM, 3rd September 2025, About 7 months ago
Reply to the comment left by TheMaluka at 03/09/2025 – 15:39
It all depends upon what you think is being inflated doesn’t it? The UK public sector pension bill is presently being inflated.