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 September 2015 - Comments: 1013
12:31 PM, 28th August 2025, About 7 months ago
Reply to the comment left by Beaver at 28/08/2025 – 11:55
Corporate landlords love the fact that the Government is targeting private Landlords, as it pushes up market rents which they benefit from without the tax burden.
However, when the private Landlord are exiting & becoming the minority, the tax take will reduce and Rachel Thieves (if she’s still around) will have to turn their sights onto the corporates to make up the shortfall.
Member Since October 2023 - Comments: 201
1:25 PM, 28th August 2025, About 7 months ago
Reply to the comment left by Matthew Jude at 28/08/2025 – 12:23
The socialists hatred of landlords goes all the way back to Karl Marx.
It took him 8 years to write his book, during which time his rent was paid by a rich benefactor (just like he was on benefits).
When the benefactor got fed up with it, and stopped paying, Marx was evicted.
He then wrote about how landlords were a parasitic class.
Because personal responsibility is kryptonite to socialists.
Colleges now glorify this lefty nonsense.
There is a whole generation who think accountability is a form of oppression.
Member Since February 2020 - Comments: 360
1:40 PM, 28th August 2025, About 7 months ago
Reply to the comment left by Robert at 28/08/2025 – 10:14
They don’t care about being fair or rules.
Just like a thief they want your money.
Funny how being a landlord is called unearned income, but being paid from the state is not classed as such.
Member Since July 2025 - Comments: 3
1:45 PM, 28th August 2025, About 7 months ago
The government is hell bent on grinding this economy to a standstill??!!
What on earth are they thinking, take take take and then take some more…
And this is supposed to grow out economy?
Member Since September 2022 - Comments: 55
4:00 PM, 28th August 2025, About 7 months ago
Unearned income is a lie. If you self manage it’s earned and if you use an agent you have to monitor their efficiency = earned.
Lie lies lies
Member Since October 2013 - Comments: 1630 - Articles: 3
4:21 PM, 28th August 2025, About 7 months ago
Reply to the comment left by Dizzy at 28/08/2025 – 10:17
NI isn’t paid at all by pensioners, who are deemed to have worked enough years to be entitled to a state pension and aren’t required to pay more in NI.
Also, the state pension is deemed a ‘benefit’, yet it is taxed as if it is income, and therefore pensioners pay income tax on their state pension if it is above the threshold. However, those who live off benefits and refuse to work, don’t pay tax and NI on their benefits. Why is that?
Member Since May 2018 - Comments: 1999
4:32 PM, 28th August 2025, About 7 months ago
Reply to the comment left by Darren Sullivan at 28/08/2025 – 16:00
I’m a small portfolio landlord, I use an agent AND work on my property.
As you say it is EARNED INCOME. I do earn it and it’s not a free ride.
If I end up having to pay NI on the net earnings AFTER finance costs that’s less of a problem for me than being unable to offset my finance costs. But if I’m faced with being unable to offset my finance costs and pay NI the only option I have is to increase the rent so that the tenant pays the bill.
These are regressive proposals. They don’t help tenants or have anything to do with ‘fairness’.
Member Since July 2013 - Comments: 1996 - Articles: 21
4:38 PM, 28th August 2025, About 7 months ago
Reply to the comment left by Rob Thomas at 28/08/2025 – 10:45
A widowed, disabled pensioner might pay more NI on her rental income than Goldman Sachs does!
Member Since February 2023 - Comments: 5
4:39 PM, 28th August 2025, About 7 months ago
It’s obvious the government has run out of ideas, not that they had any to begin with. All that their tinkering has so far accomplished is to double the black hole they came to meet.
They increase Employers’ NI which increases inflation which increases government borrowing cost and slows the economy thus causing more borrowing.
And the solution, come up with even more preposterous taxes?
Member Since September 2015 - Comments: 1013
4:43 PM, 28th August 2025, About 7 months ago
Reply to the comment left by James Powell at 28/08/2025 – 13:45
Their plan (WEF Plan in actuality} is to crash the economy (of course, they won’t admit this) and are “saying” lots of things and making a few token gestures to supposedly fix the economy which they know will be unpopular with their backbenchers/general public, and will have to be watered down.
If you understand their plan much of what is happening makes sense. Unfortunately, any one with any capital is going to come off badly (unless your part of the inner-circle).