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 August 2016 - Comments: 1190
11:18 AM, 28th August 2025, About 7 months ago
Great Britain (I refuse to use their woke term U.K.) is going to be the first Western country to fall. Financial and cultural collapse. I can see mortgage rates being 10% in 4 years time.
Member Since February 2024 - Comments: 69
11:23 AM, 28th August 2025, About 7 months ago
Reply to the comment left by Dylan Morris at 28/08/2025 – 11:18
Only 10%!!!!,,,, I remember the good old days when they went up to 16% ,,, it wasn’t fun living off cornflakes, walking 4 miles to work and 4 miles back, no TV, mobile phones hadn’t been invented…. it was dire….
Member Since May 2015 - Comments: 2188 - Articles: 2
11:24 AM, 28th August 2025, About 7 months ago
Reply to the comment left by Gromit at 28/08/2025 – 11:11
But there will be a year’s delay before we are allowed to increase rents to cover the cost of taxation. Ms Reeves may well be “Hoist with her own petard” when landlords leave like lemmings running over a cliff (I am aware that this lemmings tale is fiction).
Member Since May 2018 - Comments: 1999
11:26 AM, 28th August 2025, About 7 months ago
Reply to the comment left by Rob Thomas at 28/08/2025 – 10:45
Quite right. The fact that non-incorporated landlords can’t offset their finance costs is already perverse…it distorts the market, drives out competition and drives rents up. Faced with a tax surcharge at 40% or more, the effect of which is higher when interest rates go up, the only option a non-incorporated landlord has, other than exiting or re-mortgaging in order to put family members into property, is to raise rents.
Faced with National Insurance on rental income then again, the only option a small non-incorporated landlord has to mitigate against the problem (which may actually be resulting in a net cash-loss on the property) is to raise rents. An incorporated property business doesn’t have this problem.
So the effect of policies like this is that it is not only perverse in that it distorts the market, it is also REGRESSIVE. That’s because the tax increases targeted at landlords are actually levied on tenants in the form of higher rents both directly as the landlords struggle to recover their cash losses, and indirectly as competition is driven out of the rental market.
There is another side-effect in that if society generally wants to see capital investment in energy efficiency and security, an incorporated property business can do this without penalty, but a non-incorporated small property portfolio landlord is disproportionately penalised for raising extra investment capital.
If residential buy to let property were to be treated the same as self-employment income, or partnership income levying the same NI payments on income net of expenses then this would not distort the market as much: But to be consistent with self-employed businesses and partnerships small, non-incorporated landlord businesses would need to be able to offset their finance costs.
Member Since June 2019 - Comments: 761
11:30 AM, 28th August 2025, About 7 months ago
Of course a ‘tax’ is not a legitimate business expense so this will back calculated as a much higher rent increase along with any other fees imposed by the new bill.
Member Since May 2015 - Comments: 2188 - Articles: 2
11:34 AM, 28th August 2025, About 7 months ago
Reply to the comment left by Beaver at 28/08/2025 – 11:26
I have a half and half portfolio, running a limited company is no fun and not the tax haven you seem to suggest.
Member Since May 2015 - Comments: 2188 - Articles: 2
11:37 AM, 28th August 2025, About 7 months ago
Reply to the comment left by Sally Robinson at 28/08/2025 – 11:23
My first mortgage was at about 16%, those were the days.
Member Since September 2015 - Comments: 1013
11:43 AM, 28th August 2025, About 7 months ago
Reply to the comment left by Edward bosch at 28/08/2025 – 11:11
Rachel Thieves will call it something else to avoid that trap and so make it applicable to all private Landlords. The question will then be will it be applicable to incorporated Landlrods and be yet another anomaly that gives incorporated Landlords a competitive adavantage over private Landlords.
Member Since May 2018 - Comments: 1999
11:55 AM, 28th August 2025, About 7 months ago
Reply to the comment left by TheMaluka at 28/08/2025 – 11:34
I didn’t suggest that it was a ‘tax haven’. I also run a limited company with no property in it. A limited company is subject to corporation tax, not income tax or capital gains tax.
The government is introducing changes such that income from self-employment and property will be subject to the MTD (making tax digital) rules. Going forward, if you make more than £30K in combined property and self-employment income this year, dropping to £20K next year then you are going to have to make regular submissions via compatible software to MTD. And so going forward, getting income from property is going to be a lot more like running a company anyway.
Stopping non-incorporated landlords from being able to offset their finance costs against income (as a self-employed business, partnership or company can) distorts the market. It is regressive because it results in higher taxes being imposed indirectly on tenants as landlords have no choice but to pass the costs on. And it is regressive because it also imposes a disproportionate tax burden on the majority of small portfolio landlords whilst favouring larger incorporated businesses.
Member Since September 2023 - Comments: 22
12:23 PM, 28th August 2025, About 7 months ago
Many people are missing the point of all of these changes.
We have a government and local authorities who are waging an ideological war on “evil ” landlords.
No amount of reasonable argument can move an indoctrinated mind. This is the politics of envy, intimidation and revenge.
Unforseen consequences will always be blamed on the “evil” landlords. Get used to it and constantly explain to your tenants that this is not your doing. Ask your older tenants if they have a plan for retirement other than a room in an HMO?
Sadly I can only see the housing crisis deepening.