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 May 2015 - Comments: 2188 - Articles: 2
4:38 PM, 3rd September 2025, About 7 months ago
Reply to the comment left by Beaver at 03/09/2025 – 15:46
As a retired government scientist, I paid dearly for my pension, way more than my colleagues in industry. Do not believe all you hear about government pensions.
Member Since May 2018 - Comments: 1999
4:44 PM, 3rd September 2025, About 7 months ago
Reply to the comment left by TheMaluka at 03/09/2025 – 16:38
So your government sector pension is a Defined Benefit pension? Is that correct?
Member Since May 2015 - Comments: 2188 - Articles: 2
4:50 PM, 3rd September 2025, About 7 months ago
Reply to the comment left by Beaver at 03/09/2025 – 16:44
No, my occupational pension is not defined as a benefit.
Member Since May 2018 - Comments: 1999
5:04 PM, 3rd September 2025, About 7 months ago
Reply to the comment left by TheMaluka at 03/09/2025 – 16:50
And that’s partly the problem.
If you don’t have access to a public sector pension (more than 80% of us don’t) then you have to go private if you want a pension.
Defined Benefit Pensions paying a pension based on your final salary or possibly a combination of average salary and years of service used to be available maybe 2 or 3 decades ago. These days most people only have access to a Defined Contribution pension. Defined Contribution pensions typically don’t provide the same benefit as a pension based on salary and years of service.
So employees in the private sector are pressurised to pay into a workplace pension or similar arrangement via auto-enrolment, unless they opt out. And their employers are obliged to auto-enrol employees into a workplace pension and make contributions to it.
But people in the public sector get access to a public sector pension and they don’t see that as a benefit.
Kier Starmer got access to a ‘tax unregistered’ pension when he stepped down as the Director of Public Prosecutions.
https://www.bbc.co.uk/news/uk-politics-65037136
Rachel Reeves has drawn private pensions into the inheritance tax net and seems set to attack private pensions in the November budget. But people like Keir Starmer get to keep their pensions…and they are a very big benefit indeed.
Member Since September 2015 - Comments: 1013
5:11 PM, 3rd September 2025, About 7 months ago
Reply to the comment left by Beaver at 03/09/2025 – 14:51
Unless you believe that everyone in the Government, their advisors, the Treasury staff and the Civil Service are all incompetent morons what other explanation is there for deliberately driving the economy over a cliff and gaslighting the public that they’re not.
Member Since May 2018 - Comments: 1999
5:18 PM, 3rd September 2025, About 7 months ago
Reply to the comment left by Gromit at 03/09/2025 – 17:11
I have never said that I believed they were competent. I think that they are either incompetent, or dishonest, or a combination of both.
I can’t see why anybody who had any understanding of economics at all would set their stall out to grow the market, then increase the minimum wage together with employers’ national insurance, whilst simultaneously dropping the level at which employers’ national insurance started to be paid.
Especially not in a service economy where 61% of employment and more than 50% of turnover is in small business. And in an economy where after the last major financial crash, most of the growth in employment came from the small business sector.
Member Since September 2015 - Comments: 1013
6:06 PM, 3rd September 2025, About 7 months ago
Reply to the comment left by Beaver at 03/09/2025 – 17:18
The politicians are undoubtly not competent but not the permanent senior Treasury staff. Even a complete moron could work out Reeves actions to date will crash the economy. Ergo it is deliberate.
Member Since October 2013 - Comments: 1630 - Articles: 3
7:04 PM, 3rd September 2025, About 7 months ago
Reply to the comment left by Gromit at 03/09/2025 – 18:06
Being driven in the Treasury by Torsten Bell MP. Previously led the left-wing Resolution Foundation after having served as Ed Miliband’s Director of policy, and as a Treasury civil servant who became special adviser to Alistair Darling during the 2008 financial crisis. So, a track record of economic success. Could he become the first MP to share the experience of… the cupboard being bare… twice!
Member Since August 2025 - Comments: 3
7:10 AM, 4th September 2025, About 7 months ago
Excellent post from ‘Do they think we are stupid’. Indeed there are many inconsistencies which could be legally challenged wrt the introduction of NI to rental income.
They just have to call it an unearned income tax( levy softens it) then there is no escape for the PRS and corporate structures. But then why just apply this levy to landlords? Interest earned, dividends etc would HAVE TO BE included otherwise the optics would be that the government has got it in for the rental sector….not a good look considering a prevailing shortage of rental properties which is doggedly exacerbating homelessness.
Member Since May 2018 - Comments: 1999
10:18 AM, 4th September 2025, About 7 months ago
Reply to the comment left by Gromit at 03/09/2025 – 18:06
I see what you mean.
Certainly I think that people like Torsten Bell and Ed Miliband don’t believe in free market economics and the more electors they have potentially dependent upon them the more that keeps people like them in power. If that’s what you mean by ‘crash the economy’ then I don’t disagree with you.
Typically, left-wing politicians are disempowering. They need a population that’s dependent upon them to keep them in power. And that’s very damaging to a service economy and any economy that has the potential to thrive on innovation.
None of us knows for sure what Rachel Reeves will do in the November budget. We’ve seen some of Torsten Bell’s previous proposals…applying national insurance to landlords’ rental income…changes to pensions. For many people their buy to let is a big part of their pension.
I think that if Rachel Reeves does apply NI to rental income (which of course will raise rents for tenants as the tax is passed on) and makes further attacks on pensions then she ought to be looking at public sector pensions at the same time.